Revisiting Insider Trading Regulations: A Comparative Analysis Of Indian, UK, And USA Provisions

Taru Rohatgi & Shreya Jagadish, CHRIST (Deemed to be University), Bangalore

ABSTRACT

This research paper critically examines the regulations surrounding insider trading with a comparative lens focusing on the legislative frameworks of India, the United Kingdom (UK), and the United States of America (USA). Insider trading poses significant challenges to market integrity, investor trust, and economic efficiency, necessitating robust legal frameworks to address such misconduct. The paper begins by elucidating the essence of SEBI (Prohibition of Insider Trading) Regulations, 2015, emphasizing the importance of preventing unfair advantages gained through the misuse of undisclosed, price-sensitive information. It discusses the widespread acceptance of corporate executives' participation in share subscriptions while highlighting concerns regarding the withholding of pertinent information by top decision-makers. Drawing upon case law and statutory provisions, particularly in India, the paper analyzes key judicial interpretations and regulatory mechanisms employed to address insider trading. It delves into cases to illustrate the complexities involved in proving insider trading allegations and the role of circumstantial evidence in establishing guilt. Furthermore, the paper examines the divergent approaches to mens rea, or the intent element, in insider trading cases across jurisdictions. While Indian regulations place less emphasis on mens rea, adopting a strict liability stance, common law jurisdictions like the UK and USA typically require proof of intent for prosecution. This contrast highlights the nuanced differences in legal philosophies and the underlying principles of culpability. Additionally, the paper critiques the effectiveness of regulatory provisions such as Regulation 4 in India, which permits off-market trading among insiders possessing the same price-sensitive information. It argues for the incorporation of clearer guidelines on mens rea and evidentiary standards to enhance the efficacy of insider trading regulations.

Keywords: Insider Trading, India, mens rea, price sensitive information, SEBI (Prohibition of Insider Trading) Regulations, 2015, UK, USA