
INTRODUCTION
Finance is the backbone of an economy. Without finance, no economy can even think of its growth and development. Finance is such a factor that stimulates all the activities starting from production of goods till its consumption. Every developmental and growth- perspective projects require Finance. These necessities the smooth and proper functioning of the financial sector of an economy because it is the major regulator of finance in any economy. But there exists some faults and malpractices in our financial sector that leads to the failure of our objectives. Insider Trading is one of such practices that is followed by some people to derive an unfair advantage. This practice is the result of unequality in the availability of information. The person indulging in Insider Trading gets benefitted and earns unfair profits, but a lot of other persons are negatively impacted by his act. In today’s era, there is a dire need on the part of regulatory authority to have a proper check on this malpractice and provide such a mechanism that can eliminate such bad practice from the economy completely.
When the insiders of a company use unpublished price sensitive information for their own undue benefit or disseminate the same to any other person who uses it for taking unfair advantage, this malpractice is termed as Insider Trading. Now, Who are Insiders? What is unpublished Price sensitive Information? What kind of unfair advantage can be taken from this UPSI? Is this practice legal or illegal? What are its effects? and many more questions that can be answered by understanding the entire concept of Insider Trading in Financial Sector.

WHO IS AN INSIDER ?
According to the securities Exchange Board of India Regulations Ac, an Insider is defined as “Any person who is connected to the company or is having possession of or having access to the unpublished price sensitive information (UPSI)”.
This definition leads to consider any person as an Insider of a company only if-
(a) He is connected to that company
(b) He is in possession of or having access to unpublished Price Sensitive Information (UPSI) of the company.
Under the ambit of connected people, top executives, directors, employees, etc are included who have direct access to the UPSI the company. They are in possession of such information because of their position in the company. They directly get the information through company. The term ‘Insider’ does not include only these directly connected persons to the company, but such people also who can acquire and get access to UPSI of the company from their sources. Hence, all such persons who are having UPSI of the company, are treated as ‘Insider’ of company.

Now, the question arises to define UPSI. UPSI stands for Unpublished Price-Sensitive Information. Unpublished information denotes that information which is not in public domain i.e. the information is not available to all the persons concerned, but only to some selective persons. It is hence, Non- public information, information that has not been made available to the public till now. Price-Sensitive Information includes any information that relates directly or indirectly to a company which if published is likely to materially or financially affect the price of the securities of company. Hence, any unpublished information which is of such significance that a reasonable investor will consider it while trading in securities of a company, such information is termed as unpublished Price Sensitive Information of any company.

WHAT IS INSIDER TRADING ?
Insider trading is the practice in which the corporate insiders including employees, directors or other related officers trade in securities i.e. buy or sell the stocks in their own companies.
Legal and Illegal Insider Trading
The term ‘Insider Trading’ includes both- Legal and Illegal conduct. Hence, not every insider trading is illegal. There are such cases also where it is legal.

Legal Insider Trading - When the corporate insiders including directors, employees, etc. trade in the securities of own company, but reports regarding their trade in the disclosure forms to the regulatory authority i.e. SEBI (Securities and exchange board of India), this kind of Insider Trading is treated as legal.
Example- A CEO of a company bought 50,000 shares of stock of the own company and reported about his trade to SEBI.
Illegal Insider Trading - Insider Trading is treated as an illegal practice when “Any person uses the unpublished Price Sensitive Informative to deal in the securities of the company for his own benefit”.
When insiders i.e. top executive and employees who have access to the UPSI of the company, uses such information to earn undue profits by trading in securities or provides such information to any other person who earns profits using that, such Insider Trading is illegal in the eyes of Law.

REGULATION OF ILLEGAL INSIDER TRADING
In India, Insider Trading was earlier governed under Securities Exchange Board of India (Prohibition of Insider Trading) Regulations Act, 1992. SEBI issued new regulations in Nov. 2014 by passing SEBI (prohibition of Insider Trading) Regulations Act, 2015. After that, some amendments were introduced in 2019 also. The new provisions and regulations have been aiming to make the Indian Financial Market more transparent and provide a level-playing field to all traders and investors.
SEBI has laid down the significant penalties for the person guilty of Insider Trading which is as follows :
(i) SEBI may impose a penalty of Rs.25 crores or three times the amount of profit made out Insider Trading, which ever is higher,
(ii) SEBI may initiate the criminal prosecution or
(iii) SEBI may issue order declaring the transactions in securities based on Unpublished Price Sensitive Information or
(iv) SEBI may issue orders rest raining an insider or prohibiting an insider from dealing in the securities of company.

CASE-ANALYSIS ON INSIDER TRADING
“Rajat Gupta and Raj Rajaratnam Case”
Rajat Gupta is an Indian and a former director at Goldman Sachs and head of Mickinsey Consultancy. Raj Rajaratnam is a Sri- Lankan Tamil and a former hedge fund manager in the Galleon Group, a New York based hedge fund management firm founded by Raj himself. Mr. Raj was having abroad network of tipsters inside large companies who used to provide him unpublished price sensitive information of companies in return of some fees. He had managed to convince the world for a long time that his success was based on his good judgement skills.
In September 2008, the board of directors of Goldman Sachs approved the investment proposal of warren buffet of $5Billions. However, this information was not announced that day. Before the announcement, Mr. Raj bought 1,75,000 shares of Goldman Sachs and next day, after the announcement was made to the public, he sold all of his shares and earned a profit of $17million.
A lot of allegations were raised claiming that Mr. Rajat had called Mr. Raj immediately after the meeting and informed him about the investment of Warren Buffet. Further allegations were put saying that Mr. Raj used that information to make unfair profits.
The court of the US held them liable. It was ordered to wind up the Galleon Group company and Raj Rajaratnam was punished with 11 years of imprisonment. Rajat Gupta was imprisoned for 2 years.

PREVENTION OF INSIDER TRADING
SEBI has provided a lot of methods to get rid of Insider Trading by a company which is as follows :
• Disclosure of interest by corporate insiders that can provide suspicious, time- based and trading- based activities of the insider to the company.
• Provide limited access to the price sensitive information. Disseminate the imformation through stock exchange and transmit the same to news agency.
• Creation of such a Chinese wall that can separate the Insiders areas having possession of Public Sensitive Information from public areas.
• Company should decide Trading window facility. When PSI is not published, window should be closed. It should be opened 24 hours after information is made public.
• Minimum holding period should be decided. Securities should be held for a minimum period of 30 days for considering investment and such provisions.

NEED TO CONTROL INSIDER TRADING
• To protect the interest and reputation of the company as the practice of Insider Trading can lead to decrease the confidence of investors in company.
• To protect the profits of Investors that can be decreased because of the market manipulation due to Insider Trading.
• To maintain the confidence of people in the stock exchange operations as SEBI regulates all the tradings. And in case of any Insider Trading, people can loss confidence in stock Exchange.
• To maintain the public confidence in financial system as a whole and develop into a healthy economy having a proper financial system.

CONCLUSION
SEBI could not untangle the corruption web of Insider Trading in Indian Stock Markets despite of having great experience and advancement in the technical finesse. They are not only incompetent, but also diligently insincere. They have been able to scan the large transactions, but the scanning of smaller transactions is not possible. It took SEBI till the year 2008-09 to realize that the term 'Insider Trading' includes both the persons - inside and outside the Company who are having access to "insider" information of the Company that has the capacity to influence the stock prices. SEBI is trying to reduce this malpractice, but we need more efforts to completely eliminate Insider Trading from our economy.