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

Kaveri Pharma Ltd's compliance officer, Ms. Nisha Rao, tells a designated employee, Mr. Vikram Shah, in confidence of an unpublished upcoming merger. Vikram persuades his friend, Mr. Dhruv Mehta, to buy shares of Kaveri Pharma on the basis of this information. Vikram himself does not trade. Which statement is correct under Section 15G of the SEBI Act, 1992?

Vikram is liable under Section 15G. The section penalises an insider who counsels or procures another person to deal in securities on the basis of unpublished price sensitive information, so his own abstention from trading is no defence. Liability does not depend on any profit threshold.

  1. AVikram, as an insider, is liable because counselling or procuring another person to deal on the basis of unpublished price sensitive information is covered, even though he did not trade himselfCorrect
  2. BVikram is not liable because he did not deal in securities himself
  3. COnly Nisha is liable because she was the original source of the information
  4. DLiability arises only if Dhruv's profit exceeds twenty-five crore rupees

Explanation

Section 15G(iii) covers an insider who counsels or procures any other person to deal in securities on the basis of unpublished price sensitive information. Own trading is not required. The no-liability option wrongly confines the section to own dealing. The penalty has a minimum of ten lakh rupees, and the profit figure only affects the maximum, not the liability.

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