Prohibition of Insider Trading of Securities [Company Act 2013]

Prohibition of Insider Trading of Securities [Company Act 2013]

Section 195 of the Companies Act, 2013 states that no director or managerial personnel of the company should enter into insider trading of securities. Exception to the above section is that the director or a managerial personnel can involve themselves in any communication which is required in ordinary course of business. For Example: Mr. A director of ABC Ltd cannot enter into insider trading of securities but can make any communication if required during the ordinary course of business. Penalty Any contravention of section 195 will lead to imprisonment for a term of Five (5) Years or with fine of minimum of Rs. 5 Lakhs to maximum of Rs. 25 Crores or 3 times the aount of profit made out of insider trading whichever is higher. Following points can be used to describe insider trading in simpler words:

• Any price sensitive information which if published will affect the price of securities of company
• An act or causing an act of getting price sensitive information from non-public sources [confidential sources]
• Act of buying, selling, subscribing, dealing

OR Agreeing to buy, sell, deal, subscribe BY Director, KMP or any officer of the company

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About the Author : This article has been written byCA Manpreet Kaur She can be contacted [email protected]