According
to Companies Act, 2013, no person including any director or key managerial
personnel (KMP) of a company shall enter into insider trading.
However, as usual, nothing
contained shall apply to any communication required in the ordinary course of
business or profession or employment or under any law.
Meaning of ‘insider trading’-
a) An act of subscribing, buying, selling, dealing or
agreeing to subscribe, buy, sell or deal in any securities by any director or KMP
or any other officer of a company either as principal or agent if such director
or KMP or any other officer of the company is reasonably expected to have
access to any non-public price sensitive information in respect of securities
of company, or
b) An act of counselling about, procuring or communicating directly
or indirectly any non-public price sensitive information to any person.
Price Sensitive Information refers to any information which relates, directly or indirectly, to a
company and which if published is likely to materially affect the price of
securities of the company.
Punishment for
contravention-
·
Imprisonment upto 5 years; or
·
Fine: Minimum: Rs. 5 Lakh;
Maximum: Rs. 25 Crore or 3 times the amount of profits made out of insider
trading, whichever is higher; or
·
Both.
Despite the prior existence of a specific regulation on
insider trading, the new provision has been inserted in the 2013 Act for
completeness. However, this has led to some confusion as expressions used in
the provision such as “insider trading” are defined differently from those seen
in the specific regulation. Moreover, unlike the specific regulation for listed
Indian companies, under the 2013 Act, the provision extends to public unlisted
companies as well.
[Contributed by Shruti Agarwal]
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