In an earlier post, Mihir had remarked that while arguments for legalizing insider trading are interesting, there is a long way to go before they are actually accepted by legal systems. SEBI’s recent move to tighten insider trading norms is a case in point. ET reports that SEBI will soon amend its regulations to ban insiders from any opposing transaction within a period of six months. ‘Insider’...
Legalizing Insider Trading – recent arguments
An earlier post on this blog had looked at some theoretical arguments about whether insider trading should be banned at all. Generally, as the post noted, allowing insider trading does seem “outlandish”. Nonetheless, newer arguments against the prohibition on insider trading do continue to appear in academic works. Of course, these works are not specific to the Indian context, but are rather...
SEBI informal guidance – ESOP, Insider Trading and independent directors
The SEBI recently issued an informal guidance note on matters relevant to companies which are in the process of devising employee share option plans (ESOPs). A company contemplating an ESOP in accordance with the SEBI (ESOP and ESPS) Guidelines, 1999 wished to form an employee welfare trust to grant options to eligible employees and desired to appoint its Independent Directors as trustees of the...
Insider Trading Regulations to Undergo Further Amendments
Readers may recall that the SEBI (Prohibition of Insider Trading) Regulations, 1992 underwent detailed amendments in 2002. This was primarily to plug several loopholes in the law, some of which were exposed in the few insider trading cases that came up for hearing under the original regulations, the Hindustan Lever Case being the more prominent among them. Thereafter, earlier this year, SEBI...
Should Insider Trading be Permitted?
An affirmative answer to this question will almost always be dismissed as outlandish. But, Henry Manne, who is considered the father of law and economics, has argued for deregulation of insider trading for the last 40 years. His ideas have encountered a barrage of criticisms from other legal scholars. Further, as far as I am aware, there is no jurisdiction around the world that consciously adopts...
Stolen Information and Stock Trades: Is it Insider Trading?
This question has come up before the United States Court of Appeals for the Second Circuit, in New York. Interestingly, this involves stealing of information by hacking a computer system. Here are the brief facts as reported in the New York Times: “[T]he evidence indicates that on Oct. 17, 2007, someone hacked into a computer system that had information on an earnings announcement to be made by...
Insider Trading and Short Swing Profits
SEBI yesterday issued a Consultative Paper on introduction of ‘Short Swing Profit’ regulations in India. Under this proposal, any insider would be compelled to surrender profits to the company that are derived from a transaction involving the purchase and sale of securities by the insider within a period of six months. The consultative paper sets out the objective of the proposed regulation:...
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