ABSTRACT
Insider trading is one of the most significant challenges in the modern financial market. In layman language it means buying and selling of securities by an individual or group who has some confidential price-sensitive information which is not aware to the public. Therefore this information influences the securities in the market. The jurisprudence of insider trading evolves from US where in the case Cady, Roberts & Co. (1961) it was held that trading on undisclosed information violated fiduciary obligations and constituted fraudulent conduct. The case becomes one of the foundational principles to evolve the concept. This has led to Rule 10-b of SEC in the US. Based on these principles India has also developed insider trading. Firstly through the SEBI (Prohibition of Insider Trading) Regulations, 1992, later revised by the SEBI (Prohibition of Insider Trading) Regulations, 2015. Based on the US, the provisions of SEBI are aligned. Notable cases such as Hindustan Lever Ltd. v. SEBI and Rakesh Agrawal v. SEBI illustrate both the complexity and the growing assertiveness of regulatory enforcement in India. The paper here undertakes the jurisprudential concept of Insider trading, regulatory mechanisms, and quantitative data to analyse the effectiveness of current laws and explore the ongoing global implications of unchecked insider trading and to recommend enhancing the existing laws.
INTRODUCTION
Insider trading refers to the buying or selling of securities where the individual possess confidential information. Non-publice (UPSI)[1]. In re Cady, Roberts & Co. (1961)[2] decision, which held that trading on undisclosed material information violates the antifraud provisions of Rule 10b-5[3] under the Securities Exchange Act of 1934. This case established the foundational principle that insider trading is rooted in a breach of fiduciary duty and the unfair exploitation of informational asymmetry.
In India insider trading is defined under 2(g) of the SEBI (Prohibition of Insider Trading) Regulations, 2015[4] and 2(n) defines UPSI Unpublished price sensitive information” means any information, relating to a company or its securities, directly or indirectly, that is not generally available which upon becoming generally available, is likely to materially affect the price of the securities and shall, ordinarily including but not restricted to, information relating to the following: –
(i) financial results;
(ii) dividends;
(iii) change in capital structure;
(iv) mergers, de-mergers, acquisitions, delistings, disposals and expansion of business
and such other transactions;
(v) changes in key managerial personnel.[5]
As per the SEBI 2022-2023 annual enforcement data 59%[6] of all investigations initiated and nearly half of all investigations completed concerned insider trading, reflecting its persistent prevalence and the regulatory challenges involved in detection, surveillance, and prosecution. The large number of pending and ongoing insider trading cases illustrates the difficulty regulators face in an era of digital trading.
The reason behind insider trading should be considered illegal since it undermines fairness and transparency. Apart from this it ensures that no one is in a better position. This is not based on pareto efficiency.
RESEARCH OBJECTIVE
The first objective of the research is to study and examine the historical and jurisprudential foundations of insider trading regulation in the US. It has led to the evolution of Rule 10-b understanding the legal reasoning and ideology. The study seeks to understand how notions such as fairness, investor confidence, and informational equality became central to insider trading law. This historical inquiry provides a conceptual baseline against which India’s regulatory evolution can be compared.
The second objective is to analyse the development of Insider trading in India. The SEBI Act 1992[7] and 2015. The study also evaluates how judicial interpretations and administrative reforms have shaped the trajectory of insider trading regulation in India over the past three decades. Through this analysis, the research highlights both convergence with and divergence from international standards.
The third chapter is to evaluate the effectiveness of SEBI’s mechanism. To evaluate if there is any gap present in the laws and to recommend how we can enhance or change the loop holes present in the current law.
RESEARCH METHODOLOGY
The research adopts a dual method approach by combining historical mythology for examining the evolution of insider trading regulation in United States and analytical mythology for evaluating the compactor regulatory and the judicial framework in India the historical method is employed for the us because insider trading laws in America did not originate from a single statute but evolved through a series of the landmark judicial death decision administrative interpretation and regulatory philosophy beginning with the cases by studying these precedents the researcher traces how the concept of the fiduciary data breach of trust and the disclose or the absent tool developed overtime this method allows for an understanding of the ideological and legal institutions from the shaped the us modern insider trading doctrine.
For India the study employs an analytical methodology to examine how inside a trading in India regulated under the Sebi regulation 2015 and how codes have interpreted these rules these methods involve critically assessing statutory provision regulatory reforms and the judicial the analytical analysis focused on how Indian adopted us principles such as fiduciary duty and the informational party while adapting these domestic market gradually like promoters drive in ownership structures at the limited serve lines capacities key precedents have influenced the laws in India secondary literature from scholars policy committees and CB report was used to identify loopholes technological challenges and institutional constraints through this analytical lens the research assessed whether 2015 regulation effectively address the incited trading in the modern context or whether further reforms are necessary.
LITERATURE REVIEW
Donald Langevoort’s in his paper Rereading Cady, Roberts: The Ideology and Practice of Insider Trading Regulation (1999)[8] provides one of the most influential analyses of insider trading jurisprudence in the United States. He argues that in the landmark case Cady, Roberts & Co expanded the application of Rule 10b-5; it created a regulatory ideology centered on fairness, fiduciary duty, and investor confidence. He explains insider trading enforcement in the US. This works essential because it helps contextualize how the US system developed the legal principle and this led to influence the global regulatory structure and one of them is India.
Shukla and Dehal’s in Insider Trading: Contours of Liability and Judicial Approach (2022)[9] they provide a comprehensive analysis of insider trading and focus on the jurisprudential aspect in India. They highlighted how the Indian courts have approached insider trading in both civil and criminal cases. Their evaluation of cases such as SEBI v. Abhijit Rajan and Balram Garg v. SEBI shows how judicial insistence on mens rea weakens SEBI’s ability to enforce insider trading violations. This work situates insider trading enforcement within India’s broader institutional challenges and illustrates the tension between regulatory objectives and judicial interpretation.
Do Insider Trading Laws Matter? Some Preliminary Comparative Evidence (2005)[10] Laura Beny argues the relationship between insider trading regulation and capital market development. It shows the data across 33 countries. She also suggests stricter laws related to insider trading. These findings support the view that insider trading regulation is not merely symbolic but substantively improves market quality. Her study is particularly relevant for India, where SEBI’s enhanced regulatory framework aims to promote investor confidence and deepen market participation.
Insider Trading: Comparative Analysis of India and the USA (2015)[11], which examines how India adapted its insider trading framework by drawing from U.S. legal principles such as fiduciary duty, breach of trust, and informational parity. This work explains how India’s shift from the 1992 Regulations to the 2015 Regulations reflects an attempt to align with international standards while addressing domestic concerns, including promoter-driven shareholding structures and lower levels of financial transparency. The paper also identifies the gaps that persist between intention and enforcement, noting that India continues to struggle with surveillance and evidentiary issues that the U.S. addressed decades earlier.
In SEBI and Its Role in Prohibiting Insider Trading (2010)[12] Gupta and Ray’s explains the institutional evolution of SEBI. The authors detail how SEBI introduced increasingly sophisticated compliance requirements, expanded definitions of insiders, and enhanced surveillance mechanisms to prevent misuse of UPSI. Despite these advancements, they highlight persistent structural issues, such as cross-border information flows, limited technological capacity, and challenges in evidence collection. Their work illustrates the gap between rule-making and real-world enforcement, signaling the need for greater institutional strengthening.
Litigating Insider Trading: Decoding Evidences in Cases under SEBI (PIT) Regulations, 2015 (2021)[13], it focuses on evidentiary challenges which provided insider trading violation before the SEBI and SAT. The author argues that insider trading fails due to the courts high demand for the proof. This work is especially important in the context of SEBI’s ongoing struggle to secure convictions in complex cases.
Vaishnavi Vatsa’s Insider Trading and the Regulatory Overreach of SEBI (2024)[14]. In this author criticized the broad interpretation of insider and UPSI she also acknowledges that the Supreme Court’s decision in SEBI v. Abhijit Rajan reined in this perceived overreach by introducing motive as a relevant factor. Her work highlights the delicate balance between strong enforcement and regulatory excess.
Arnav Gulati’s Exploring the Role of Motive in Insider Trading: A Case Study of SEBI v. Abhijit Rajan (2023).[15] This author examines the case and the principles given by the court and undermines the SEBI guidelines.
Insider Trading Laws in India: An Opportunity to Reduce Malpractices (2025)[16] it examines how technological evolution has increased the insider trading cases. This paper argues that India must modernize enforcement tools to keep pace with global markets, emphasizing that digital forensics, big data analysis, and AI-driven monitoring are essential for combating sophisticated insider networks.
Shaurya Singh’s Analysing Insider Trading in India: Is SEBI Still Missing Teeth? (2024)[17] the author criticizes the SEBI enforcement and inefficiency. Despite having a strong regulation since the cases are not decreasing due to the lack of technological advancement. By comparing SEBI with the U.S. SEC, Singh argues that India’s regulator must develop stronger surveillance systems, expand jurisdictional powers, and streamline procedures to enhance deterrence.
These works create a comprehensive analysis and stating how insider trading can be improved in India. However there are certain research gap since all the paper only talk about why SEBI is falining and none of them recommend any solution. Therefore this paper stands out and will propose the recommendation to improve the laws relation to the insider trading in India
RESEARCH QUESTION
The paper will deal with the fundamental question that whether the existing laws in India related to insider trading are efficient and what are the additional frameworks the SEBI can make to make the laws of Insider trading much more efficient. The paper will suggest recommendations like whistleblower protection, audit reports which SEBI can enforce and improve the insider trading.
HISTORICAL AND JURISPRUDENCE OF INSIDER TRADING
The evolution of Insider trading began in the United States where at that time it was not considered illegal. Earlier the court used the approach of Caveat Emptor. However, the Securities Act of 1933 and the Securities Exchange Act of 1934, creating the Securities and Exchange Commission (SEC) and laying the foundation for federal securities enforcement. Although neither statute explicitly defined or prohibited insider trading, they introduced antifraud provisions—most notably Section 10(b) of the 1934 Act and Rule 10b-5—which later became the legal bases for insider trading prohibition.
In the case of Cady, Roberts & Co. (1961) the case involved a broker who tricked the clients with the confidential information. It was held that corporate insider hold fiduciary duty to shareholders not to use material, non-public information for personal gain. Second, he introduced the principle of “disclose or abstain,” stating that insiders must either make the information public or refrain from trading. Based on this principle in the case of SEC v. Texas Gulf Sulphur Co[18]. there was a broad interpretation of “disclose or abstain” rule, holding that anyone in possession of material, non-public information must refrain from trading until the information is fully public. Later in Dirks v. SEC (1983)[19], holding that tippee liability depends on whether the insider breached a fiduciary duty by disclosing information, and whether the tippee knew or should have known of this breach. This decision established the “personal benefit test”.
Through these cases, US insider trading jurisprudence has established the U.S. approach is unique in that insider trading remains a judge-made doctrine built on broad antifraud provisions rather than explicit statutory text. This has allowed courts to adapt the law to changing market realities, but it has also created ongoing debates about consistency, clarity, and the limits of judicial interpretation.
INSIDER TRADING IN IN INDIA
the development of insider trading in India has strongly been influenced by the United States where India has adopted the mechanism which the US have followed and based on the jurisprudence the Indian laws have been framed. The case Caddy Robert has influenced the Indian laws and based on that the first regulation India SEBI prohibition of insider trading act came into the picture 1992 followed by insider trading prohibition rules 2015. The Indian adopted the modernized of regulatory regime in insider trading 2015 where they adopted position-based tests similar to the standards applied in the SEC of U.S. Sebi also inspired by the principle of information partiality ensuring that equal market access to relevant information the structure of liability under the Indian regulation including the triple trippy responsibility duty of fiduciaries and restriction of improper disclosures and all the principles which are based in the case of Drisk v. SEC[20]
Judicial interpretation has involved differently compared with the US jurisprudence in the early case such as Hindustan Liver Limited V. SEBI in 1998[21] Indian authorities took a broad US style approach by focusing on the access to the UPSI rather than providing intent consistent with the sec enforcement philosophy. Similarly in Rakesh Agarwal vs SEBI 2003[22]particular reflect us reasoning when it examined whether a fiduciary breach occurred during a trading however these securities appealed tribunal acceptance of the bona fide purpose as a defines derived from the US doctrine which maintains that the trading while in possession of UPSI and lawful regardless of motive.
In SEBI vs Abhijit Ranjan 2022[23] the Supreme Court of India held at the motive and the Prophet intention must be considered when determining insider trading liability this requirement represents a clear break from the US system where reliability under rule 10 B does not depend on the profit motive but on whether the fiduciary duty was breached and whether the material information was misused this case shows the difference between the insider trading laws in us and insider trading laws in India in India we have also approached the method of the profit motive and the profit method. One more importance of this case was that it shifted the liability from civil liability rather to the criminal liability and creating a potential obstacle for seb in providing insider trading violations in India there can be both civil as well as criminal liability for the breach of the insider trading frameworks.
Sebi reliance on instructor digital bids databases codes of conduct trading windows norms and control mechanism for UPSI parallels the sec historical information on compliance infrastructure yet India’s court have introduced the interpretive complexities that the us system resolved decades earlier through the consistent judicial doctrine even though India has adopted the us doctrine however there are a difference between the Indian doctrine as well as the us doctrine indian Jurisprudence has evolved through combinations of the us influence domestic market realities and the judicial interpretation while Sabi Regulation remained closely aligned with the international standard Indian codes have at a time diluted regulatory efficiency by imposing intent based requirements this ongoing tension between the us regulatory designs and the Indian judiciary philosophy continues to straight the insider trading enforcement in India.
Loopholes in the SEBI (Prohibition of Insider Trading) Regulations, 2015
Prohibition of insider trading regulatory 2015 represent an improvement compared to the 1992 framework however there are certain loopholes and the structural weakness continue to undermine the effectiveness of the laws one of the most critical issue is the difficulty of proving communication of the UPSI unpublished price sensitive information inside a trading often occurs through private channels encrypt messaging family members or information conversion making it hard to stay to establish a direct link between the flow and the trading behaviour.
The regulation adopt a position based standard but in practice CB still struggles to gather the evidence demonstrating that the insider trading actually or transmitted UPSI compounding this problem is the absence of the clear statutory guidelines on the circumstantial evidence which leads to inconsistent interpretation by the securities ability and creates uncertainty in enforcement.
Apart from this there is one more loop hool which is broad and sometimes ambiguous definition especially concerning with the connected peoples while the 20 2015 regulation were interred to widen the insider net the lack of clarity regarding the remote relationships in formation connection and incidental access can lead to both inclusive and under exclusive information in the Devin companies. In the case of Sebi vs Abhijeet Ramjan the Supreme Court consider the profit motive and profit intent when determining the insider trading liability this judicial ship weakness is strict liability and the motive and the spirit of the 20 2015 framework and imposes an additionally burden on the Sabi by requiring proof of intention.
India is still a developing country the technological and structural limitation for the expose the gaps in 2015 regulation despite requiring companies to maintain a structured digital database the implements of the code Sabi lags at 1 serve lines technologies equivalent to the us making detection and the sophisticated networks difficult.
One of the major loopholes is that the 2015 regulation do not adequately address the shadow trading where insiders trade in economically correlated securities of the other companies using unfair nor do they sufficiently ring trading front running by intermediaries or intelligent trading via friends or relative all of which remains difficult to trace the penalty framework while stricter than before still lags the deterrent effect associated with the criminal sanctions and the long delay ink completing investigation further reduces the enforcement credibility.
Lastly while these say bee are rombust in paper significant loopholes remain in interpretation enforcement technology capacity and judicial clarity additional lead these caps through enhanced surveillance infrastructure legislative reinforcement information cooperation and consider judicial standard is essential for India to maintain a fair transport and trustee worthy securities market.
RECOMMENDATION
The first major recommendation is the strengthening of the cross border enforcement mechanism which has been essential due to the increasing of the globalized nature of financial market now insider trading today often involves foreign brokers offshare accounts and oversea exchange and a digital communication platform beyond SEBI territorial reach the 202015 regulation while comprehensive domestically cannot effectively address the violation that occurs through foreign jurisdiction without the corporation from the international regulators. screening the cross button for me would require India to expand mutual legal assistance treaties MLTS engaging in bilateral information sharing agreements with the key markets such as USUK and Singapore and practice effectively in international security regulatory frameworks enhanced cross border cooperation would enable faster access to trading data foreign bank recoils encrypt communication logs and evidence stores in overseas servers it is necessary for combating sophisticated insider networks without such cooperation inside a trading can easily be exploited gaps to escape liability
Commendation emphasizing the need for the stronger and more structured whistleblower protection and insensitive system insider trading is not surely difficult to detect because it involves private communication and convert trading strategies that external servants cannot easily capture whistleblower especially the employees or the intermediaries with the direct acknowledge with the UPSI misuse provide crucial evidence that regulatory cannot access through traditional investigation means although Sebi introduced a whistle blower mechanism in 2019 it lags the robust of the programs like us sec which often financial rewards and legal protection strengthening whistleblower mechanism in India should include guarantee in our miter protection against employ relationship meaningful monetary insensitive for credible information and clear investigation pathway for handling disclosures where insider trading have insensitive to report misconduct rather than participate in it more importantly a secure and rewarding whistleblow system contributes to building up the culture internal accountability with corporation.
Recommendation calls for the implementation of mandatory digital compliance audit recognizing the insider trade increase takes place through the digital platform’s electronic communication and algorithm threatened while the 2015 regulation require companies to maintain a structured digital database of upsc receipts many firms do not update or monitor these system rigorously resulting in gaps at hinders the CB investigation mandatory digital compliance audits would require companies to undergo. Technological driven examination of how they manage upside documents access logs tracks data leaks and enforce the digital firewalls these audits concerns either by Sabi or an independent certified professional whether the companies are following protocols such as maintaining trading windows per saving emails and server data monitoring employee trading accounts and securing sensitive financial information with use of the gaps and be remote working environmental digital audits are essential to ensure that the UPSI is properly contained and the companies do not adversely enables the insider trading through lax of cybersecurity practice.
Lastly with these recommendations inside a trading today does not occur in the enthusiastic domestic market but within the interconnected digital and global ecosystem a stronger cross border mechanism allows to chase violation beyond indeed water a rhombus whistleblower mechanism empowers the individual to escape misconduct and mandatory digital audits ensure companies uphold high standards of the information governance collectively these reforms would enhance the Sabbie ability to deter detect and prosecute the insider trading ensuring a more transparent and trustee worthy securities market
CONCLUSION
Many of the insider trading regulation reveals a clear foundational from the US jurisprudence and shape the landmark cases and how did the India adopt and adapt these principle within its own legal system while India regulatory framework particularly the CB reflects a global best practice to the concept of such possession based liabilities structured digital database and compressive definition of insight the practical enforcement landscape prevents the complex so digital decisions have introduced the intent based consideration that diverge from the US model and create an Indian civil enforcement mechanism these doctrine shifts combines with the technological challenges communication and the cross border districts say the capacity to efficiently defect and prosecute insider trading the recommendation given in this paper helps the Sabi to enhance the laws and the existing frameworks complying to it it highlights the continuity weakness in the servants evidentiary standards and institutional coded coordination the recommendation proposed rendering the cross border information establishing a rhombus visceral incentive mechanism and mandating digital compliance audits offer practical pathways to address these limitations eliminating or reducing insider trading is essential not merrily as a regulatory priority but as maintaining the investor confidence promoting market fairness and ensuring the long term integrity of India financial system as market technologically and globally grows insider trading India’s ability to reinforce insider trading regime will play a role in shaping the credibility and competitiveness in the capital market.
[1]unpublished price sensitive information
[2]In re Cady, Roberts & Co., 40 S.E.C. 907 (1961).
[3] SEC Rule 10b-5, 17 C.F.R. § 240.10b-5.
[4] SEBI (Prohibition of Insider Trading) Regulations, 2015.
[5]2(n) of SEBI (Prohibition of Insider Trading) Regulations, 2015.
[6] Securities and Exchange Board of India, Annual Report 2022–23, at 138–40 (2023), available at https://www.sebi.gov.in/reports-and-statistics/reports/sep-2023/annual-report-2022-23_76392.html
[7] SEBI (Prohibition of Insider Trading) Regulations, 1992.
[8] Donald C. Langevoort, Rereading Cady, Roberts: The Ideology and Practice of Insider Trading Regulation, 99 Yale L.J. 1319 (1990).
[9] Girjesh Shukla & Aditi Dehal, Insider Trading: Contours of Liability and Judicial Approach, 64 JILI 1 (2022).
[10] Laura N. Beny, Do Insider Trading Laws Matter? Some Preliminary Comparative Evidence, 7 Am. L. & Econ. Rev. 144 (2005).
[11]Insider Trading: Comparative Analysis of India and the USA (2015).
[12] Richa Gupta & Smita Ray, SEBI and Its Role in Prohibiting Insider Trading, 5 Int’l J. Mgmt. & Soc. Sci. Res. 1 (2016).
[13]Litigating Insider Trading: Decoding Evidences in Cases Under SEBI (PIT) Regulations, 2015, 13 NLIU L. Rev. 118 (2021).
[14] Vaishnavi Vatsa, Insider Trading and the Regulatory Overreach of SEBI, 57 Jindal L. Rev. 220 (2024).
[15] Arnav Gulati, Exploring the Role of Motive in Insider Trading: A Case Study of SEBI v. Abhijit Rajan, 12 NUJS L. Rev. 457 (2023).
[16]Insider Trading Laws in India: An Opportunity to Reduce Malpractices, 8 Indian J. Corp. L. 95 (2025).
[17] Shaurya Singh, Analysing Insider Trading in India: Is SEBI Still Missing Teeth?, 32 Nat’l L. Sch. India Rev. 77 (2024).
[18]SEC v. Texas Gulf Sulphur Co., 401 F.2d 833 (2d Cir. 1968).
[19]Dirks v. SEC, 463 U.S. 646 (1983
[20]Dirks v. SEC, 463 U.S. 646 (1983
[21]Hindustan Lever Ltd. v. SEBI, (1998) 18 S.C.L. 311 (SAT–Mum)
[22]Rakesh Agrawal v. SEBI, (2003) 113 Comp Cas 42 (SAT).
[23]SEBI v. Abhijit Rajan, (2022) 9 SCC 529.
