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CS Executive · Capital Market and Securities Laws · Prohibition of Insider Trading

A listed company's insider, Kavita, communicates unpublished price sensitive information to a friend who asked for it; the communication was not required in the ordinary course of business or under any law. Under Section 15G of the SEBI Act, 1992, what is the position?

Kavita is liable under Section 15G because communicating unpublished price sensitive information is penalised whether or not requested, unless required in ordinary course of business or by law. The penalty is at least Rs 10 lakh, up to Rs 25 crore or three times profits, whichever is higher.

  1. AShe is liable to a penalty of not less than ten lakh rupees, extending to twenty-five crore rupees or three times the profits, whichever is higherCorrect
  2. BShe is liable only if the friend actually made profits
  3. CShe is not liable because the friend requested the information
  4. DShe is liable to a maximum penalty of one lakh rupees

Explanation

Section 15G(ii) covers communicating UPSI to any person, with or without request, except in the ordinary course of business or under law. Hence a request is no defence and profit by the friend is not needed. The penalty range is minimum Rs 10 lakh, up to Rs 25 crore or three times profits, whichever is higher.

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