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

Rohit, a finance manager at a listed company, casually tells his friend Karan about an unannounced merger that has not been made public. Karan does not trade. Under the SEBI Act, 1992, is Rohit's act of telling Karan, without any business need or legal requirement, a contravention?

Yes. Communicating unpublished price sensitive information to any person, whether or not requested, is penalised unless required in the ordinary course of business or under law. The offence is complete on communication, so it does not depend on Karan trading or on Rohit being paid.

  1. AYes, because communicating unpublished price sensitive information to any person, with or without request, except in the ordinary course of business or under law, is penalisedCorrect
  2. BNo, because a violation arises only if the recipient actually trades
  3. CNo, because communication to a friend is a private matter
  4. DYes, but only if Rohit receives money from Karan

Explanation

Section 15G penalises an insider who communicates UPSI to any person, with or without request, unless it is required in the ordinary course of business or under law. The recipient's trading is not needed for the communication offence. Hence the option requiring actual trading is wrong.

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