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

Ravi, a finance manager at a listed company, mentions the company's unannounced merger plan to his friend over dinner, without any business reason or legal requirement to do so. Under Section 15G of the SEBI Act, 1992, what is the position of Ravi's act of communication?

Ravi is liable to penalty. Section 15G(ii) of the SEBI Act punishes an insider who communicates unpublished price sensitive information to anyone, whether or not it was requested, unless it is required in the ordinary course of business or under law. A casual dinner disclosure fits neither exception.

  1. AIt is not an offence unless the friend actually trades on the information
  2. BIt is penalisable, because an insider who communicates unpublished price sensitive information to any person, except in the ordinary course of business or under any law, is liable to penaltyCorrect
  3. CIt is permitted because the friend did not request the information
  4. DIt is penalisable only if Ravi himself made a profit from dealing in the shares

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Section 15G(ii) penalises an insider who communicates unpublished price sensitive information to any person, with or without his request, except as required in the ordinary course of business or under any law.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 had no such business or legal reason. Hence the option saying that the friend must trade or must have requested the information is wrong.

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