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

Meera, a director of a listed company, does not deal in shares herself but advises her brother to buy the company's shares just before a favourable result is announced, relying on unpublished price sensitive information. Under Section 15G of the SEBI Act, 1992, her act is best described as:

Meera is liable. Section 15G(iii) of the SEBI Act covers an insider who counsels or procures any other person to deal in securities on the basis of unpublished price sensitive information. It does not matter that she did not trade herself or that her brother is not an insider.

  1. ANot covered, as she personally did not deal in securities
  2. BCovered only if her brother pays her a commission
  3. CCovered, since an insider who counsels or procures another person to deal on the basis of UPSI is liable to penaltyCorrect
  4. DCovered only if the brother is also an insider

Explanation

Section 15G(iii) penalises an insider who counsels or procures any other person to deal in securities on the basis of unpublished price sensitive information. Personal dealing is not necessary, and the text does not require a commission or the other person being an insider.

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