Insider trading: Indian perspective on prosecution of insiders
| Date | 10 May 2011 |
| Published date | 10 May 2011 |
| DOI | https://doi.org/10.1108/13590791111127732 |
| Pages | 162-168 |
| Author | Madhav Misra |
| Subject Matter | Accounting & finance |
Insider trading: Indian
perspective on prosecution
of insiders
Madhav Misra
National Law University, Jodhpur, India
Abstract
Purpose – The purpose of this paper is to discuss and evaluate the Indian legal system with regard
to prosecution of persons involved in insider trading.
Design/methodology/approach – The project follows an analytical and deductive methodology.
The theoretical information was gathered from books and the internet. The assimilated information
was analyzed on the basis of which conclusions were drawn. The sources for the research have been
mentioned in the relevant footnotes when used.
Findings – Although Indian law has relevant provisions to deal with insider trading, it is not
effective enough to curb this white-collar crime. The criminal remedies are not implemented because of
the lengthy formalities and the requirement of proving it “beyond all reasonable doubt”. The civil
penalties, even though invoked, are not enough to act as a deterrent and face several lacunae. These
shortcomings have been addressed in the papers with relevant recommendations to the law making
body – the Securities and Exchange Board of India (SEBI).
Research limitations/implications – Afield study would havebeen desirable to bring out some of
the problems from direct sources like officials and employees of the SEBI. However, this proposal was
limited by the fact that the SEBI does not have an office in the city of Jodhpur and hence the information
has been gathered from sources, such as books and the internet.
Originality/value – The paper will be of value to foreign investing institutions looking to invest funds
in Indian stock markets, tothe regulating agencies such as SEBI, law making agencies and experts in the
field of corporate law.
Keywords India, Insider trading,Crimes, Administration of justice
Paper type Research paper
Insider trading: an overview of the Indian law
Introduction
Insider trading or insider dealing may be described as dealing in securities by a person
having access to material confidential price-sensitive information of a company.
An insider is usually a person who holds informational advantages (Levmore, 1982).
There are divergent views on the legitimacy of prohibition of this practice, both in the
legal and economic circles. The aspect has since long been deliberated, with the legal
opinion clearly being against the practice.
Background and emergence of the Indian law
It was only about three decades back that insider trading was recognized in many
developed countries as what it was – an injustice; in fact, a crime against shareholders
and markets in general. At one time, not so far in the past, inside information and its use
for personal profits was regarded as a perk of office and a benefit of having reached a
high stage in life (Singh, n.d.).
The current issue and full text archive of this journal is available at
www.emeraldinsight.com/1359-0790.htm
JFC
18,2
162
Journal of Financial Crime
Vol. 18 No. 2, 2011
pp. 162-168
qEmerald Group Publishing Limited
1359-0790
DOI 10.1108/13590791111127732
To continue reading
Request your trial