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

Ravi, a finance manager at a listed company, learns of an unannounced merger. He tells his friend Sunil, who is not connected with the company, about it, and the communication was not required in the ordinary course of business or under any law. Under Section 15G of the SEBI Act, 1992, how is Ravi's act treated?

Ravi is liable to penalty under Section 15G(ii) of the SEBI Act, because an insider who communicates unpublished price sensitive information to any person, with or without a request, is covered unless the communication was in the ordinary course of business or required by law.

  1. APenalisable, because communicating unpublished price sensitive information to any person, with or without request, is covered unless required in the ordinary course of business or under lawCorrect
  2. BNot penalisable, because only dealing in securities attracts the section, not communication
  3. CPenalisable only if Sunil actually trades and makes a profit
  4. DNot penalisable, because Sunil did not request the information

Explanation

Section 15G(ii) penalises an insider who communicates unpublished price sensitive information to any person, with or without his request, except as required in the ordinary course of business or under any law. Ravi's communication fits no exception. The option requiring Sunil's trade or request is wrong because the section covers communication itself.

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