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

Rajan, an insider at Veda Steels Ltd, communicates UPSI to a friend, who trades on it. Rajan says the information was shared without any request from the friend and not in the ordinary course of business. Under section 15G of the SEBI Act, 1992, what is the position and the minimum penalty?

Rajan is liable under section 15G of the SEBI Act even though the friend never asked, since communication with or without request is covered unless in the ordinary course of business or under law. The penalty is at least ten lakh rupees, up to twenty-five crore rupees or three times profits, whichever is higher.

  1. ARajan is liable even without a request; the penalty is not less than ten lakh rupees and may extend to twenty-five crore rupees or three times the profits, whichever is higherCorrect
  2. BRajan is not liable because the friend did not request the information
  3. CRajan is liable only if the profits exceed twenty-five crore rupees, with no minimum penalty
  4. DRajan is liable only under the Companies Act, 2013, section 195

Explanation

Section 15G covers communicating UPSI to any person with or without request, except as required in the ordinary course of business or under any law. The penalty is not less than ten lakh rupees, extending to twenty-five crore rupees or three times the profits, whichever is higher. Section 195 of the Companies Act was omitted.

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