When it comes to prominent white-collar crimes, insider trading is something unique as it’s quite well-known among the general public. Similar to most major economic powers, insider trading is a punishable offence in the Republic of India and is enforced by a government agency known as SEBI (Securities and Exchange Board of India), the Indian equivalent of the FTC (Federal Trade Commission).
Insider trading can be defined in a simplistic manner as the illegal practice of trading public company shares (or other securities) on stock exchanges to one’s own advantage through access to confidential or non-public information. This practice is generally illegal as it is believed to provide an unfair advantage to a person with special access to confidential information. Normally this illegal practice involved one or many company “insiders” providing confidential or non-public information to a select group of people, or they themselves utilize this information, for personal financial gain from trading stocks and other types of futures.
When it comes to insider trading in Indian territory, it is addressed in section 11(2)E of the Companies Act of 1956, and in more detail in SEBI’s Prohibition of Insider Trading Regulations. Indian law puts a hefty fine and possible jail time if one is caught committing the crime of insider trading.
By definition, once any confidential critical piece of information becomes available to the general public, utilization of this information does not come under insider trading and is perfectly legal from the Indian legal system. To create such a desirable situation the insider in question could pass confidential information via an intermediary which can convert their secretive information into something that’s publicly available. The best candidate for such an intermediary might be a news agency, however this might result in the insider and their associates looking their unique edge as the general public will take action based on this news. This is where less-credible media outlets, especially those which promote conspiracy theories can be utilized. By using such media outlets, an insider can convert confidential or non-public information into something that’s in the public domain while being ignored by the majority of investors and the general public. If SEBI or any law enforcement agency questions the insider, they can always show them this less-credible news source. To be safe, it is advisable for the insider to pass on this data to the media outlet(s) anonymously while claiming to be a whistle-blower. Additionally this method will work only once in most cases.
In conclusion, this method provides a potential strategy which can enable one to get away with insider trading on Indian soil. Additionally this method can be utilized in different parts of the world if tweaked accordingly based on local legal procedures.
Author’s Note: Please note that we don’t condone such morally questionable actions and everything described here are for academic purposes only.
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