Abstract

India’s position as a global economic force, inter alia, mandates the need for a robust regulatory framework for its securities market, to boost the confidence of both the domestic and the international investors that their money is safe in a fair and transparent securities market. In the recent years, India has witnessed large price fluctuations in the shares of public companies during the periods of mergers or acquisitions and illegal trading on the basis of unpublished price sensitive information, which has caused great concern to the Indian securities market. If the fiduciaries who run the companies for the benefit of the shareholders gain unjust enrichment at the cost of the company and its shareholders, it becomes a heinous crime. Although illegal insider trading is a global phenomenon, a study by the IMF reports that it is relatively high in countries such as India, China, Russia, etc., resulting in high volatility in share prices. Indian studies also have reported that insider trading activity is observed amongst companies belonging to the same business group prior to merger announcements.

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