Insider Trading: SEBI Action on Ex-IndusInd Bank Executives
Why in the news
SEBI restrained five former senior IndusInd Bank officials, among them ex-MD and CEO Sumant Kathpalia and former Deputy CEO Arun Khurana, and ordered disgorgement of ₹19.78 crore, the losses they avoided through trades based on UPSI.
About insider trading
Buying or selling listed-company securities by people holding Unpublished Price Sensitive Information.
- Insiders: employees and directors, relatives of connected persons, exchange or clearing house officials, trustees and AMC board members, and executives of holding or associate companies.
- UPSI examples: dividends, quarterly or annual results, buybacks or new issues, mergers, acquisitions, takeovers, major strategic changes.
| Legal | Illegal |
|---|---|
| Insider trades without using UPSI; disclosed to the exchange | Trades based on UPSI; hidden and unfair |
| Example: planned sale after retirement | Example: selling after learning of a big acquisition |
Regulation
- SEBI (Prohibition of Insider Trading) Regulations, 1992, updated in 2015 and 2019.
- Aims: fairness, transparency, no information asymmetry, equal access.
- Prohibited: dealing while holding UPSI, and sharing UPSI with outsiders except where legally required.
- 2019 update: a code of conduct for UPSI, mechanisms to detect leaks and accountability at all levels.
- Section 11(2)(e), Companies Act, 1956 also bars insider trading, to curb manipulation and protect investors.
Exam angle
- UPSI full form; disgorgement amount ₹19.78 crore; regulator SEBI.