CS Executive · Capital Market and Securities Laws · Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market
Rahul, a director of a company listed on a recognised stock exchange, buys its shares a day before an unannounced merger decision, using information not yet public. Which provision of the SEBI Act, 1992 does his conduct most directly contravene?
Rahul's trade contravenes Section 12A(d) and (e) of the SEBI Act, which prohibit insider trading and dealing in securities while in possession of material or non-public information. He bought on unpublished merger news, so the insider trading prohibition applies rather than the control acquisition clause.
- ASection 12A(d) and (e), which prohibit insider trading and dealing while in possession of material or non-public informationCorrect
- BSection 12A(f), which restricts acquiring control beyond the permitted percentage
- CSection 12A(a), which deals only with the issue of unlisted securities
- DSection 15HA, which only prescribes a penalty and does not itself define any prohibition
Explanation
Section 12A(d) prohibits engaging in insider trading and 12A(e) prohibits dealing in securities while in possession of material or non-public information. Rahul's purchase on unpublished merger news falls squarely there. Section 12A(f) concerns acquisition of control, which is not the issue. Section 15HA is a penalty provision, not the prohibition he breached.
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