What is Insider Trading and why it is illegal.
                     WHAT IS INSIDER 
TRADING AND 
WHY IT IS 
ILLEGAL?
INSIDER TRADING
Insider trading is a malpractice in the market trading of traded 
company shares (such as bonds , stocks or stock options) carried 
out by people who have access to non-public company information 
because of their jobs.
Source: groww.in
W•HY IS IUNSIDnERf TaRADiIrNG  fILoLEGrAL ?other investors: 
• Insider trading is seen as unethical to other stock market 
holders who do not have access to the results. 
• Potentially, an investor with non-public knowledge could 
make much greater stock market returns than a normal 
investor could not.
Source: groww.in
U•N-ETHIICAnL T ERtMhS e stock market, it is a socially wrong and immoral way of 
investing. Both investors should be granted fair opportunity to 
trade in the same piece of business knowledge.
Source: groww.in
• In either market, insider dealing lowers the confidence of people 
in the trading process.
•HAMPERSI PEfOP LEe’S COqNFIDuENCiEty holders did not feel that the price was fair, they would 
be less likely to venture into trade, and the market conditions 
would be badly harmed. 
Source: 
www.legalindia.com
• The Securities and Exchange Board of India (SEBI) agreed on 18 
January 2019 to keep the company's promoters liable for breach 
of insider trading standards, regardless of their shareholding 
position, if they have undisclosed price-sensitive information 
(UPSI) about the company without any lawful intent. 
SEBI LAYS DOWN A NEW RULE TO PREVENT INSIDER TRADING IN INDIA
Source: livemint.com
• Insider information is awareness of content connected to a 
publicly listed firm that provides the broker or investor with an 
unfair benefit.
INSIDER TRADING VS. INSIDER INFORMATION
Source: money.com
• Insider trading is most popular for chief officers and directors, but it's not about 
them only. 
• The crime can be committed by any person with access to confidential 
knowledge about a stock. 
• Insider trade news outside the company may be exchanged by high-level 
WHO IS USUeALLY INxVOLVeED INc INSIDuER TRtADIiNGv? es and it might help a friend or family member.
Source: stockstotrade.com
• In reaction to the stock market crash of 1929, the first insider trading 
legislation came forth. 
• Before that in Goodwin v. Agassiz, the Massachusetts Supreme Court had 
held that having insider information was a "perk" to being an insider. 
• The Stock Exchange Act was enacted in 1934 as an addendum to the 
WHAT’S THES HISTOeRY BEcHIND uINSIDErR TiRAtDINGi?es Act of 1933. Since then, most insider trading penalties and 
regulations invoke the Act of 1934.
Source: stockstotrade.com
• Legal Insider Trading : Insiders are lawfully entitled to purchase and sell the 
company's stock and all subsidiaries that employ them.
• Illegal Insider Trading: The illicit use of non-public material information for 
WHAT AREg THEa TWOi nTYPEsS OF  INiSsIDER  TtRAhDINGe?  more notorious method of insider trading. 
Source: stockstotrade.com
• Dilip Pendse worked as the Managing Director of TATA Finance Ltd's wholly-owned subsidiary, Nishkalpa. 
• Nishkalpa had a deficit of 79.37 crores as of March 31st, 2001. Dilip leaked to his wife this price-
sensitive information. 
• In order to prevent losses, 90,000 shares owned by his wife and a business jointly managed by his wife 
INFAMOUS INSIDER TRADING CASE
and her father-in-law in Nishkalpa were sold during this time. 
• He was found guilty of insider trading by Dilip Pendse, his wife, and the business collectively owned by 
his wife and her father in law.
Source: stockstotrade.com