By Jayant M. Thakur, Chartered Accountant
BACKGROUND
The Securities and Exchange Board of India (SEBI) has recently issued (on 31st March, 2023) comprehensive Frequently Asked Questions (FAQs) on its regulations relating to insider trading – the SEBI (Prohibition of Insider Trading) Regulations, 2015 (the Regulations). It is good to see this practice continuing whereby, not just clarifications, even if not binding, are given on important and repetitive issues, but they are all updated and provided at one place. The Regulations are fairly complex with a series of deeming provisions. Insider trading violations are regularly caught through a fairly sophisticated data surveillance, coupled with good investigation and quick orders. Of course, some orders are found wanting on evidence or principles of law applied and do not stand up on appeal, but the fact that such Regulations exist and there is a close watch acts as a deterrent. Insider trading reduces the credibility of markets since investors would feel demoralised if, whether in purchase or in sale, the insiders are able to illegally profit from information they are entrusted with as fiduciaries.
The Regulations are also distinct, in the sense that many of the provisions have a note attached to them which explain the intention of the particular provision. The FAQs add further to this by explaining and clarifying many provisions.
BINDING NATURE OF FAQS
It would be axiomatic to say that the Act and
