Insider Trading And Market Manipulation: A Menace Or A Strategy

Manish Riju, Chanakya National Law University

ABSTRACT

India is a vast country, full of opportunities and expectations for both individuals and firms operating here. The basic aim of floating a company is to make profits and this is clearly evidenced by the growing number of corporations in Indian market. Since the growth of a nation depends upon the growth of the corporations operating, therefore the onus of carrying on the business in a legal way is upon them. However, in the long run, some flouting mechanisms have been developed to make huge profits in a short span of time, thus devising the practice of “insider trading”. Though such practices may favor the insiders of a company, but it ultimately leads to the reduction of confidence of the investors. India has witnessed such unethical way of market manipulation and the menace of insider trading, the result being the emergence of various laws and regulations to curb such practices. The establishment of SEBI with the sole objective to protect the investors from such malpractices, various regulations such as SEBI (Prohibition of Insider Trading) Regulations of 1992 and 2015, SEBI (Prohibition of Fraudulent & Unfair Trade Practices Relating to Securities Market) Regulation, 2003, Companies Act, 2013 are there to effect penalties on those who are involved in such practices. But the studies show that there is “no or minimal convictions” in such cases. Here the question arises that is India too soft on insider traders & market manipulators? In this paper the author has tried to analyze the reasons of the pendency of cases regarding insider trading, the low detection of cases of market manipulation and price rigging and low conviction rates even when the case has been detected and also that the insider trading and market manipulation being a strategy or malpractice detrimental to the interest of investors.