FINANCIAL INSTITUTUINS AND MARKETS

AIGS
Unit-4
Security Exchange Board of India [SEBI]
Meaning of Regulators
Of or relating to a person or organization whose job is to control an activity or process or to
the regulations themselves.
Financial Regulatory Bodies in India
Financial regulators are government or non-governmental organizations responsible for
overseeing and regulating financial markets and institutions to ensure their stability, integrity,
and fair operation. They establish and enforce rules and regulations that govern various
aspects of the financial sector.
Financial Regulators in India
In India, the history of financial regulation is marked by the establishment of various
committees and regulatory bodies that have shaped the country’s financial sector. Here is a
precise description of some key milestones and committees related to financial regulation in
India:
Hilton Young Commission (1926)
The Hilton Young Commission was appointed to recommend reforms in India’s currency and
banking system. It led to the passing of the Reserve Bank of India Act in 1934, which
established the Reserve Bank of India (RBI) as the central banking institution.
Narasimham Committee I (1991)
The Narasimham Committee I was formed under the chairmanship of M. Narasimham to
assess and suggest reforms in the Indian financial system. It recommended measures to
strengthen the banking sector, including capital adequacy norms, asset classification, and
provisioning norms.
Securities and Exchange Board of India (SEBI) (1992)
SEBI was established as a statutory regulatory body under the Securities and Exchange
Board of India Act, 1992. It aimed to regulate and develop the securities market in India,
protecting the interests of investors and ensuring fair practices.
Narasimham Committee II (1998)
The Narasimham Committee II, chaired by M. Narasimham, focused on financial sector
reforms. It recommended measures such as reducing government interference, strengthening
banking supervision, encouraging consolidation, and addressing issues related to non-
performing assets.
Insurance Regulatory and Development Authority of India (IRDAI) (1999)
IRDAI was established under the Insurance Regulatory and Development Authority Act,
1999, to regulate and oversee the insurance industry. It aimed to protect the interests of
policyholders, promote insurance penetration, and ensure the stability of the insurance sector.
Pension Fund Regulatory and Development Authority (PFRDA) (2003)
PFRDA was set up under the PFRDA Act, of 2003, to regulate and develop the pension
sector in India. It aimed to promote retirement income security by introducing reforms such
as the National Pension System (NPS) and regulating pension funds and intermediaries.
Financial Sector Legislative Reforms Commission (FSLRC) (2011)
The FSLRC was constituted to review and recommend changes to the legislative framework
governing the financial sector. It proposed the creation of a unified financial regulatory
agency, the Indian Financial Code, and reforms in securities, insurance, and banking laws.
These committees and regulatory bodies played significant roles in shaping the financial
regulatory landscape in India. They brought about reforms to enhance the stability,
efficiency, and transparency of the financial sector, while also safeguarding the interests of
investors and promoting market development.
Role of Financial Regulators
Here are key points which highlight the roles performed by financial regulators:
Regulation and Supervision
Financial regulators establish and enforce rules, regulations, and standards to govern various
aspects of the financial industry.
They supervise financial institutions, including banks, insurance companies, securities firms,
and other entities, to ensure compliance with regulatory requirements.
Regulators conduct inspections, audits, and examinations to assess the financial health, risk
management practices, and compliance of regulated entities.
Licensing and Registration
Financial regulators issue licenses and registrations to financial institutions and
intermediaries to operate in the regulated sectors.
They evaluate the qualifications, competence, and integrity of applicants before granting
licenses.
Regulators maintain registers of licensed entities, ensuring transparency and accountability
in the financial system.
Investor Protection
Financial regulators enforce measures to protect the interests of investors and customers in
the financial markets.
They establish disclosure requirements, ensuring that investors receive accurate and timely
information about investment products, risks, and performance.
Regulators take action against fraudulent activities, market manipulation, and unfair trade
practices to safeguard investors’ rights.
Market Surveillance and Enforcement
Financial regulators monitor financial markets to detect and prevent market abuse, insider
trading, and other illegal activities.
They investigate complaints, market misconduct, and breaches of regulatory provisions.
Regulators have the authority to impose penalties, sanctions, and disciplinary actions against
violators of financial regulations.
Financial Stability and Systemic Risk Management
Financial regulators focus on maintaining overall financial stability and managing systemic
risks.
They assess and mitigate risks that could potentially disrupt the functioning of the financial
system or cause widespread economic harm.
Regulators work closely with central banks, government agencies, and international bodies
to coordinate efforts in crisis management and risk mitigation.
Policy Development and Guidance
Financial regulators contribute to the formulation and development of financial policies and
regulations.
They provide guidance, interpretations, and clarifications on regulatory matters to ensure
consistent compliance by regulated entities.
Regulators may propose reforms and recommend changes to existing laws and regulations to
adapt to evolving market conditions and challenges.

Financial regulators may have a variety of responsibilities, including:

• Supervising financial institutions such as banks, credit unions, and insurance

companies to ensure that they comply with laws and regulations

• Enforcing laws and regulations related to financial products and services, such
as consumer protection laws and anti-money laundering regulations

• Monitoring financial markets to detect and address potential risks or threats to

financial stability

• Conducting investigations and imposing penalties on financial institutions or

individuals that violate laws or regulations Examples of financial regulators
include the Securities and Exchange Commission (SEC) in the United States,
 the Financial Conduct Authority (FCA) in the United Kingdom, and the
European Central Bank (ECB) in the European Union.

Financial regulators play a critical role in maintaining the stability, integrity, and efficiency
of the financial system. By establishing and enforcing rules and standards, these institutions
aim to protect consumers, promote fair competition, and prevent systemic risks.

Types of Financial Regulators

Central Banks
Central banks are responsible for implementing monetary policy and overseeing the
stability and functioning of the financial system. They also act as lenders of last resort to
ensure liquidity during times of crisis.

Functions and Roles

Central banks' primary responsibilities include issuing currency, managing interest rates,
controlling the money supply, and acting as a lender of last resort. They also play a crucial
role in supervising and regulating the banking sector and other financial institutions.

Monetary Policy

Monetary policy is the process by which central banks manage the money supply to achieve
specific economic objectives, such as price stability, low inflation, and sustainable economic
growth.

This is typically achieved through tools such as open market operations, setting interest rates,
and reserve requirements.

Examples: Federal Reserve, European Central Bank, Bank of England

Notable examples of central banks include the Federal Reserve in the United States, the
European Central Bank in the Eurozone, and the Bank of England in the United Kingdom.

Securities and Exchange Commissions

Securities and Exchange Commissions (SECs) are responsible for regulating and
overseeing securities markets, ensuring transparency and fairness.

Functions and Roles

SECs are tasked with maintaining fair and efficient securities markets, preventing fraud, and
protecting investors. Their responsibilities include registration and oversight of market
participants, enforcement of securities laws, and promoting disclosure and transparency.

Market Supervision and Transparency

SECs regulate and supervise securities markets to ensure that all participants adhere to the
relevant laws and regulations. They also promote transparency by requiring companies to
disclose accurate and timely financial information.
Examples: U.S. Securities and Exchange Commission, Financial Conduct Authority
Well-known SECs include the U.S. Securities and Exchange Commission and the Financial
Conduct Authority in the United Kingdom.

Insurance Regulators
Insurance regulators oversee the insurance industry to ensure solvency and protect
policyholders.

Functions and Roles

These regulators are responsible for licensing, supervising, and monitoring insurance
companies to ensure that they maintain adequate capital and follow sound business practices.

They also establish standards for the treatment of policyholders and resolve disputes between
insurers and their customers.

Solvency and Policyholder Protection

Insurance regulators ensure that insurance companies have sufficient capital and reserves to
meet their obligations to policyholders. They also protect policyholders by enforcing fair
practices and resolving disputes.

Examples: National Association of Insurance Commissioners, Prudential Regulation

Authority
The National Association of Insurance Commissioners in the United States and the
Prudential Regulation Authority in the United Kingdom are examples of insurance
regulators.

Banking Supervisory Authorities

Banking supervisory authorities oversee the banking sector to maintain its safety, soundness,
and compliance with applicable laws and regulations.

Functions and Roles

Banking supervisory authorities are responsible for licensing, regulating, and supervising
banks and other financial institutions. They ensure that banks maintain adequate capital,
manage risk effectively, and follow prudent lending practices.

Prudential Regulation and Supervision

Prudential regulation refers to the rules and standards designed to ensure the safety and
soundness of financial institutions. Supervisory authorities enforce these regulations and
monitor banks to ensure compliance.

The Office of the Comptroller of the Currency in the United States and the European
Banking Authority are examples of banking supervisory authorities.
What is SEBI? Structure & Functions

Introduction to SEBI
Established on April 12, 1992, the Securities and Exchange Board of India is a regulatory
body or organization operating under the umbrella of the Government of India (Ministry of
Finance).
Responsible for monitoring the national capital and the securities market, the headquarters of
SEBI or the Securities and Exchange Board of India are located in Mumbai, Maharashtra,
India. Working towards the regulation of the Indian capital and securities, this organization
has several roles and responsibilities that fall under its functions.

With a vision to protect the interests of the investors and an objective to develop the market
of securities, SEBI is headed by its chairman - Ajay Tyagi. Under the SEBI Act of 1992, the
board received its powers and roles from January 30, 1992.

What is the Structure of SEBI?

The organizational structure of the Securities and Exchange Board of India begins with the
Board Members including the Chairman of SEBI.
However, the organizational structure of the statutory body comprises the Board (5
members) and 24 departments that together work towards the regulation and surveillance of
the financial market of the country.
Let us discover more about the structure of the Securities and Exchange Board of India.
Board Members-
• Shri Ajay Tyagi
• Shri G. Mahalingam
• Ms. Madhabi Puri Buch
• Shri S.K. Mohanty
• Shri Ananta Barua
Following the board of SEBI, the organization is further segregated into 24 departments that
work under the jurisdiction of the Ministry of Finance as one single entity. These are as
follows:-
 1. Commodity Derivatives Market Regulation Department
This department is responsible to maintain surveillance over the working of
Commodity Derivative Segments of Recognized Stock Exchanges/Recognized
Clearing Corporations and supervise their operations altogether.
This role is carried out by 9 divisions of the department namely-
• Division of Exchange Administration.
• Division of Complaints
• Division of Investor Awareness -1
• Division of Investor Awareness -2
• Division of Market Policy
• Division of New Products
• Division of Risk Management
• Division of Products
• Division of Inspection

2. Corporation Finance Department

This department is required to work around the following areas-

• Listing and issuing of securities

• Schemes including mergers, divisions, accumulations, reduction in finances
• Governance of corporate organizations and auditing criteria
• Restructuring of corporate organizations through takeovers/ mergers/ buy-backs
• Delisting of a security
This department’s roles and responsibilities are fulfilled by 3 divisions namely-
Division of Issues and Listing, Division of Corporate Restructuring, and the Division of
Compliance and Monitoring

3. Corporation Finance Investigation Department

This department is responsible for investigating matters related to financial fraud,
diversion of funds, non-compliance with rules, and mis-conduct of fiscal matters.
 4. Department Economic and Policy Analysis
The Department of Economic and Policy Analysis deals with matters of statistics and
publication and regulatory research. Furthermore, this department’s responsibilities
revolve around the updation of details and regulatory developments.

5. Department of Debt and Hybrid Securities

This department is concerned with matters related to corporate bonds, debt securities,
and shares. This is done through the operation of 3 divisions (Division 1, Division 2,
Division 3) that monitor primary issuance and debt securities policy, post-listing
compliance, and Municipal Bonds and Green Bonds respectively.

6. Enforcement Department - 1
The Enforcement Department - 1 looks after appeals reported against SEBI in the
Securities Appellate Tribunal (SAT). The division operating under this department is
the Division of Regulatory Action.

7. Enforcement Department - 2
Similar to the functions of the Enforcement Department - 1, this department’s functions
too revolve around resolving matters registered with SAT.
The divisions working under the jurisdiction of this department are as follows-
• SAT Litigation Division
• Prosecution Division
• Settlement Division

8. Enquiries and Adjudication Department

The department of Enquiries and Adjudication is concerned about quasi-judicial issues
and adjudicates upon those matters that are reported against the violators as per the
jurisdiction of SEBI.

9. General Services Department

The General Services Department looks after the internal working of the organization.
The following divisions operate under the leadership of this department-
• Treasury and Accounts Division
 • Facilities Management Division
• Official Language Division
• Office of the Secretary to the Board
• Protocol and Security Division

10.Recovery and Refund Department

The Recovery and Refund Department looks after procuring recoveries from defaulters
who fail to pay dues. The divisions that operate under this department are as follows-

• Recovery Division 1
• Recovery Division 2
• Recovery Division 3
• Special Enforcement Cell

11.Human Resources Department

The department looks after human resources and conducts recruitment processes for the
organization.

12.Division of Foreign Portfolio Investors and Custodians

This department looks after foreign investors who invest in the securities market and
deal with the custody of securities in the international sphere.

13.Information Technology Department

The department conducts technological operations in the organization.

14.Integrated Surveillance Department

The department is concerned with the monitoring of all domains of the securities
Market.

15.Investigations Department
The Investigations Department is concerned with investigating and inspecting matters
of susceptible breach in the Securities Market. This department also provides the leads
to the Enforcement Department for further proceedings in the judicial realm.
16.Investment Management Department
This department deals with the management of financial investments in the Securities
Market.
17.Legal Affairs Department

The Legal Affairs Department is required to provide legal consultation to the board of
the organization and it handles the functions through the following divisions-
• Divisions of Policy- General
• Division of Policy and Regulatory Affairs for Commodity Derivatives.
• Division of Regulatory Assistance - General
• Division of Regulatory Assistance for Commodity Derivatives

18.Market Intermediaries Regulation and Supervision Department

This domain works along the lines of supervision of market mediators and regulates
their operations from registration to inspections.

19.Market Regulation Department

The department regulates the infrastructure of market institutions like stock exchanges
and supervises the functioning of them all around. The following divisions work under
this department-
• Division of Policy (DoP)
• Division of SRO Administration (DSA)
• Division of Risk Management and New Products (DRMNP)
• Division of Market supervision (DMS)
• Investor Complaints Cell (ICC)

20.Office of International Affairs

The Office of International Affairs promotes the regulation of the Securities market in
consultation and regard with foreign bodies like SEBI. It also works towards the
protection of investors by engaging with foreign regulatory bodies and organizations.
 21.Office of Investor Assistance and Education
This department focuses to impart investor education and guide investors in the right
direction. Furthermore, it is required to assist investors and will deal with complaints
related to the transfer of securities, company listings, and governance matters.

22.Office of the Chairman

The Office is headed by the Sebi chairman - Shri Ajay Tyagi. It has 2 divisions headed
by the office- Communications Division and Executive Assistant.

23.Regional Offices
The regional offices are required to work along the lines of the organization’s vision
and report to the regional heads.

24.Vigilance Department
The Vigilation Department is headed by the Chief Vigilance Officer. The role of this
department is to detect mishappenings in the organization, put an end to corruption
within the organization, and take preventive measures for the same.

Evolution of SEBI

Primarily established as a non-statutory body in the year 1988, the Securities and Exchange
Board of India became independent on January 30, 1992, when the SEBI Act (1992) came
into existence.

Officially established in its present nature on April 12, 1992, SEBI is a government
organization that operates under the jurisdiction of the Ministry of Finance. Over time, the
organization has worked towards its vision of protecting the investors’ interests and
regulating the Securities Market.

By formulating numerous committees and taking various actions in order to maintain a

harmonious environment in the market, SEBI has been introducing major informatory steps.
“SEBI has also proposed a detailed ‘advertisement code’ for those providing investment
advice to check misleading advertisements promising unrealistic returns in the securities
market.”SEBI regulations

Powers of SEBI

When it comes to the powers of SEBI, there are 3 main powers of the organization. They are
as follows-

1. Quasi-Judicial - The first and foremost power of this organization is that it has partial
judicial powers in declaring judgments in fraudulent matters or misconduct in the
Securities Market.

2. Quasi-Executive -The organization also has the power to incorporate rules and
implement legal actions in order to establish an environment of fairness and
transparency in the market. It can also take steps against violators.

3. Quasi-Legislative - The third power of SEBI falls in the legislative domain. The
organization has the power to formulate laws and regulations and frame guidelines in
order to protect the rights of investors and keep violations at bay.

What’s more, the operations of SEBI are overlooked by the Supreme Court of India and the
Securities Appellate Tribunal (SAT).

(Referred blog: What are Derivatives?)

What are the Roles and Responsibilities of SEBI?

In this segment, we will discuss the various roles that the organization has in order to gain a
better insight into the same. Let’s get started! Here is a brief introduction to the roles and
responsibilities of the Securities and Exchange Board of India and various objectives of
SEBI.

1. The primary role of SEBI is to preserve the rights of investors in the Securities Market
and promote the development of securities in the domain.
2. It is responsible for providing a fair and transparent platform to share brokers, sub-
brokers, bankers, agents, merchants, advisers, and other professionals to take part in
the market and regulate its operations. One of the functions of SEBI is also to regulate
the functioning of securities, custodians of securities, and foreign investors.
3. SEBI is responsible for the prevention of frauds and misconducts in the Securities
market. It is also responsible for the prohibition of insider trading in the sphere.
4. The organization is required to impart investor education, trading regulations , and
educate investors about investment mediators too
5. It is responsible for the surveillance of shareholding and take-over of companies, or
even mergers in the corporate sphere. Another role of SEBI in the capital market is to
take care of research and development of the market round the clock.

Summing Up
To sum up, the Securities and Exchange Board of India is a statutory body that has its
headquarters located in Mumbai, Maharashtra, India. One of the most reputed and dignitary
set-ups from worldwide, SEBI is known for its preventive actions and regulations in order to
maintain vigil across the securities market.
Established on April 12, 1988, this body has been in function for over several decades and
continues to possess a visionary attitude in order to maintain discipline in the realm of the
securities market and related domains.

With more than 20 departments to conduct its operations around the country, SEBI holds a
firm position in the eyes of its people.

Insider Trading
Insider trading refers to the buying or selling of securities by individuals who have access to
non-public information about a company or its securities.
This information can be about financial performance, strategic plans, or other material events
that can significantly impact the price of the company's securities.

Such practice is illegal and considered a form of securities fraud. It weakens the integrity of
financial markets and harms other investors who do not have access to the same information.

Understanding insider trading is crucial for investors, traders, legal professionals, business
executives, students, and the general public.

Insider trading can have a significant impact on the financial markets, leading to a distortion of
market prices, discouraging other investors from trading, and reducing liquidity.

Ethical considerations for investors and traders include the importance of transparency,

fairness, and ensuring a level playing field for all investors.

IDEAL CLIENTS:
Business Owners, Executives & Medical Professionals

FOCUS:
Strategic Planning, Alternative Investments, Stock Options & Wealth Preservation

IDEAL CLIENTS:
Retirees, Immigrants & Sudden Wealth / Inheritance

FOCUS:
Retirement Planning, Personal finance, Goals-based Planning & Community Impact

Regulations and Laws Governing Insider Trading

Insider trading is illegal under US federal securities laws.

Several regulations and laws govern insider trading, including the Securities Exchange Act of
1934, the Insider Trading and Securities Fraud Enforcement Act of 1988, the Sarbanes-
Oxley Act of 2002, and Dodd-Frank Wall Street Reform and Consumer Protection Act of
2010.

These laws provide a legal framework to ensure that investors have access to material
information and prevent insiders from taking advantage of non-public information.

Securities Exchange Act of 1934

The Securities Exchange Act of 1934 was executed to protect investors and ensure the integrity
of the financial markets. Section 10(b) of the act makes it illegal to use or employ any
manipulative or deceptive device in connection with the purchase or sale of any security.

The act also requires companies to file periodic reports with the SEC and disclose material
information to the public.
Insider Trading and Securities Fraud Enforcement Act of 1988
The Insider Trading and Securities Fraud Enforcement Act of 1988 amended the Securities
Exchange Act of 1934 to provide additional enforcement tools for insider trading violations.

The act increased penalties for insider trading, including fines, imprisonment, disgorgement of
profits, and civil penalties. It also extended the statute of limitations for insider trading from two
to five years.

Sarbanes-Oxley Act of 2002

The Sarbanes-Oxley Act of 2002 was enacted in response to accounting scandals involving
Enron and WorldCom.

The act provides additional protections for investors and requires companies to establish and
maintain internal controls and financial reporting procedures. It also mandates that CEOs and
CFOs certify the accuracy of financial statements.

Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010

The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 was enacted in
response to the financial crisis of 2008. The act aims to improve transparency and accountability
in the financial industry and includes provisions to address insider trading.

The act requires companies to establish whistleblower programs and provides protections for
whistleblowers who report insider trading violations.

Prohibitions on Insider Trading

Insider trading is prohibited under US federal securities laws, and engaging in illegal trading
activities can result in severe penalties.

This section will explore the types of illegal trading activities, the penalties and consequences of
insider trading, and the exceptions to insider trading.

Illegal Trading
Illegal trading activities can include tipping off others, misappropriating information, and
trading based on material non-public information. Tipping off others involves disclosing non-
public information to another party, who then uses that information to buy or sell securities.

Misappropriating information refers to the theft or unauthorized use of confidential information

for personal gain. Trading based on material non-public information means using information
not yet available to the public to buy or sell securities.

Penalties and Consequences of Insider Trading

The penalties and consequences of insider trading can be severe. Criminal penalties can include
up to 20 years in prison and fines of up to $5 million for individuals and $25 million for
corporations.
Civil penalties can include fines of up to three times the profits gained or losses avoided as a
result of the violation. Additionally, insider trading can damage an individual's reputation and
lead to career and financial setbacks.

Exceptions to Insider Trading

There are exceptions to insider trading, such as pre-arranged trading plans and trades based on
public information. Pre-arranged trading plans are trading plans that are established in advance,
and the trades are made at a later date regardless of any non-public information that may be
available.

Trades based on public information are trades that are made based on information that is
available to the general public. However, even with these exceptions, individuals must still
ensure that their trading activities comply with all applicable regulations and laws governing
insider trading.

Companies may have additional policies and procedures in place to prevent insider trading, and
individuals should seek advice from legal professionals if they are unsure about the legality of
their trading activities.

Insider Trading and the Financial Markets

Insider trading can have a significant impact on the financial markets. It can create an unfair
advantage for insiders, leading to a distortion of market prices.

It can also harm market efficiency by discouraging other investors from trading and reducing
liquidity.

Impact of Insider Trading on the Financial Markets

Insider trading can create an unfair advantage for those who have access to non-public
information. This can result in a distortion of the market and undermine the trust of investors,
leading to a loss of confidence in the fairness and integrity of the financial system.

It can affect the stock price of a company. When insiders buy or sell shares based on privileged
information, the market may interpret this as a signal of the company's future prospects, leading
to a change in the stock's value.

This can cause fluctuations in the market and create uncertainty for investors.

Lastly, insider trading can lead to illegal activity and be harmful to investors. The Securities and
Exchange Commission (SEC) has established regulations to prevent insider trading and to
ensure that all investors have equal access to information.

Violations of these regulations can result in fines, penalties, and even imprisonment.

Ethical Considerations for Investors and Traders

In addition to the legal implications, insider trading raises ethical concerns for investors and
traders.
It can create an uneven playing field for investors, leading to distrust in the financial markets. It
can also harm companies by reducing their ability to raise capital and eroding investor
confidence.

Investors and traders have a responsibility to act ethically and avoid engaging in illegal activities
such as insider trading. Ethical considerations include the importance of transparency, fairness,
and ensuring a level playing field for all investors.

They should be aware of the regulations and laws governing insider trading and seek advice
from legal professionals if they are unsure about the legality of their trading activities.

Insider Trading and Market Efficiency

Insider trading can also affect market efficiency, which is the extent to which prices reflect all
available information.

When insider trading occurs, prices may not reflect all available information, leading to
distortions in the market. This can lead to a misallocation of resources and harm market
efficiency.

Remedies to over come the problems of Insider Trading

Companies have insider trading policies and procedures to prevent insider trading. These
policies require employees and executives to report their trading activities and prohibit them
from trading based on non-public information.

Companies also provide training and education on insider trading to ensure that their employees
understand the legal and ethical implications of insider trading. Monitoring and reporting
suspected insider trading is essential to prevent illegal activities.

Training and Education on Insider Trading

Training and education on insider trading are crucial for ensuring that employees and executives
understand the legal and ethical implications of insider trading. Companies can provide training
through seminars, online courses, and other educational resources.

The training should cover the regulations and laws governing insider trading, the penalties for
violating insider trading laws, and ethical considerations for investors and traders.

Monitoring and Reporting Suspected Insider Trading

Companies must monitor and report suspected insider trading to prevent illegal activities.
Companies can use internal controls, such as trading blackout periods, to prevent insiders from
trading based on non-public information.

Companies can also establish whistleblower programs to encourage employees to report

suspected insider trading violations.

Other remedies
Conduct Due Diligence .
Take extra care out side of the office .
Clearly define Sensitive non public Information.
Never disclose non-public information to out siders.
Don’t Recommend or induce based on inside information.
Be cautious in Informal or Social Settings.
Promptly report any concerns.
Watch out for irregular trading patterns.
Organise back out periods.
Famous Cases of Insider Trading
Insider trading has been a focus of law enforcement for many years, and several high-profile
cases have made headlines.

These cases have involved well-known individuals and companies, highlighting the importance
of upholding the law and the potential consequences of violating insider trading regulations.

Martha Stewart Case

One of the most famous insider trading cases involves Martha Stewart, a well-known
businesswoman and television personality. In 2004, Stewart was convicted of insider trading
and sentenced to five months in prison and two years of supervised release.

She was found guilty of selling shares of a company called ImClone Systems after receiving
non-public information about an FDA decision that was expected to negatively affect
the company's stock price.

Raj Rajaratnam Case

The Raj Rajaratnam case involved the founder of the Galleon Group, a hedge fund that was
accused of engaging in insider trading. Rajaratnam was found guilty in 2011 of multiple counts
of securities fraud and conspiracy to commit insider trading.

He was sentenced to 11 years in prison and ordered to pay a fine of $92.8 million. Rajaratnam
was found to have made over $50 million in illegal profits by trading on non-public information
about companies such as Goldman Sachs and Intel.

Steve Cohen Case

The Steve Cohen case involved Cohen's hedge fund, SAC Capital Advisors, which was accused
of engaging in insider trading. The hedge fund was fined $1.8 billion in 2013 for insider trading
violations.

Cohen was not charged with a crime, but the case highlighted the importance of
upholding ethical standards in the financial markets and the potential consequences of insider
trading violations