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

Meera Textiles Ltd's compliance officer notes that a director, Mr. Arun Bose, has bought shares of the company while holding unpublished price sensitive information about a pending large export order. Under Section 15G of the SEBI Act, 1992, what is the penalty range for such insider trading?

The penalty is not less than ten lakh rupees but may extend to twenty-five crore rupees or three times the profits made from insider trading, whichever is higher. This is laid down in Section 15G of the SEBI Act, 1992, and the higher ceiling applies.

  1. ANot less than ten lakh rupees, extending to twenty-five crore rupees or three times the profits made, whichever is higherCorrect
  2. BNot less than one lakh rupees, extending to twenty-five lakh rupees
  3. CNot less than ten lakh rupees, extending to twenty-five crore rupees or three times the profits made, whichever is lower
  4. DA fixed penalty of twenty-five crore rupees irrespective of profits

Explanation

Section 15G sets a minimum penalty of ten lakh rupees and a maximum of twenty-five crore rupees or three times the profit made from insider trading, whichever is higher. The 'whichever is lower' option reverses the rule. The one lakh to twenty-five lakh range is from Section 67 of the Companies Act, which is unrelated.

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