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MARKET MANIPULATION AND INSIDER TRADING

 


Market Manipulation in India:


Market manipulation involves fraudulent practices that artificially influence the prices of securities or create a misleading appearance of market conditions. In India, market manipulation is primarily regulated by the Securities and Exchange Board of India (SEBI) under the SEBI Act, 1992, and the SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003.


Types of Market Manipulation:


Price Rigging:


Manipulating the demand and supply of securities to create artificial price movements. This can involve collusive trading, cornering the market, or creating false market trends.


False or Misleading Information:


Spreading false rumors or making misleading statements to influence investor decisions.


Wash Trades:


Executing simultaneous buy and sell orders in the same security to create artificial trading volume or price movement.


Circular Trading:


Executing trades between related parties to create a deceptive appearance of genuine trading activity.


Marking the Close:


Engaging in large-volume transactions near the market close to manipulate the closing price.


Spoofing:


Placing fake buy or sell orders to deceive other market participants and manipulate prices.


Enforcement and Penalties:


SEBI actively monitors trading activities and investigates instances of market manipulation. It has the power to conduct inquiries, inspections, and take disciplinary action against individuals or entities found guilty. Penalties for market manipulation may include monetary fines, disgorgement of illegal gains, debarment from participating in the securities market, and criminal prosecution in severe cases.


Insider Trading in India:


Insider trading involves the buying or selling of securities based on non-public, material information about a company. It gives insiders an unfair advantage and undermines market fairness and investor confidence. In India, insider trading is regulated primarily by the SEBI (Prohibition of Insider Trading) Regulations, 2015, which aim to prevent trading based on unpublished price-sensitive information (UPSI).


Insiders Covered:


The regulations define insiders as "connected persons" who have access to UPSI by virtue of their position or relationship with the company. This includes directors, officers, employees, and other individuals connected to the company.


Key Provisions:


Trading Window:


Companies are required to establish a trading window during which insiders can trade in securities. The trading window remains closed during specified periods, such as when UPSI is available or during the announcement of financial results.


Disclosure Requirements:


Insiders must disclose their trading transactions to the company within specified timelines.


Prohibition of Communication:


Insiders are prohibited from communicating, directly or indirectly, UPSI to any person, except for legitimate purposes.


Code of Conduct:


Companies are mandated to establish a code of conduct for prevention of insider trading and educate insiders about their obligations.


Insider Trading Guidelines:


SEBI has issued guidelines providing clarifications and interpretations on various aspects of insider trading regulations.


Enforcement and Penalties:


SEBI conducts investigations into suspected instances of insider trading. If found guilty, individuals can face penalties, including monetary fines, disgorgement of illegal gains, debarment from accessing the securities market, and criminal prosecution in certain cases.


Reporting Suspicious Activities:


SEBI encourages investors and market participants to report any suspicious activities related to market manipulation or insider trading. Complaints can be lodged with SEBI directly or through the SCORES platform, which offers an online mechanism for filing complaints and grievances.


It's important to note that the information provided here is a general overview of market manipulation and insider trading in India. For detailed and up-to-date information, it is advisable to refer to the relevant laws, regulations, and guidelines issued by SEBI.


Fortunity Academy is a Share Market Classes and Trading Training Institute located at Dadar, Mumbai. Students learn how to analyse financial accounts, assess business fundamentals, and spot prospective investment possibilities in stock market classes or stock market courses. We are also learning how to read stock charts, spot market trends, and use technical indicators to decide what to trade. To assist students in protecting their investment, risk management strategies are also emphasised. These include stop-loss orders and adjusting position sizes. When it comes to stock market investment, we can offer advice and knowledge.


www.fortunityacademy.in

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Location: Mumbai, Maharashtra, India

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  1. Chart MonksApril 4, 2025 at 5:43 PM

    Awesome post! At Chart Monks, we love seeing content that aligns with our mission. We offer beginner-friendly online trading courses, including technical trading courses and a Hindi trading course, all designed to make learning easy and practical for new traders.

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