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

Sunrise Foods Ltd, a listed company, has finished its quarterly accounts, which are not yet public. Its finance head, Mr. Rajesh Iyer, tells his brother-in-law about the unexpectedly high profit, although the brother-in-law has not asked for it and the communication is not needed in the ordinary course of business or under any law. Under Section 15G of the SEBI Act, 1992, this conduct by an insider falls under which limb?

The conduct falls under the communication limb of Section 15G. An insider who communicates unpublished price sensitive information to anyone, with or without a request, is liable unless it is required in the ordinary course of business or under law. No trading by the insider is needed for this limb to apply.

  1. ACommunicating unpublished price sensitive information to a person, with or without request, except in the ordinary course of business or under lawCorrect
  2. BDealing in securities on the basis of unpublished price sensitive information on his own behalf
  3. CAcquiring control of a listed company beyond the permitted percentage
  4. DEmploying a device or scheme to defraud in connection with the issue of securities

Explanation

Section 15G(ii) penalises an insider who communicates unpublished price sensitive information to any person, with or without that person's request, unless it is required in the ordinary course of business or under law. Here the disclosure was voluntary and had no business or legal need, so it is covered. The dealing limb does not apply because no trade by Rajesh is described.

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