A comparative analysis of SEBI insider trading regulations as per Indian regulatory regime vis a vis U K and U S A

Abstract

Despite the introduction of the SEBI (Prohibition of Insider Trading) Regulations, 2015, insider trading remains a persistent issue in India. Inconsistencies in enforcement, ambiguities in legal definitions, and evolving market complexities hinder the effectiveness of the regulatory framework. This study critically examines the current insider trading laws in India, identifies key challenges in their implementation, and proposes evidence-based reforms by drawing comparisons with international best practices, particularly from the USA and UK. A major challenge in India s regulatory framework is the ambiguity surrounding the definitions of quotUnpublished Price-Sensitive Informationquot (UPSI) and quotconnected persons.quot While UPSI is defined as information likely to materially affect security prices, its interpretation remains highly subjective, leading to enforcement inconsistencies. Similarly, the broad definition of quotconnected personsquot complicates the determination of whether an individual possessed and misused UPSI. In contrast, jurisdictions like the USA and UK have developed clearer statutory definitions and judicial precedents, such as SEC v. Texas Gulf Sulphur Co. in the US and the UK s Market Abuse Regulation (MAR), which provide more objective criteria for identifying insider trading violations. newlineEnforcement challenges further weaken the deterrent effect of insider trading laws in India. SEBI often relies on circumstantial evidence and trading pattern analysis to establish violations, but judicial scrutiny especially from the Securities Appellate Tribunal (SAT) demands conclusive proof of intent to impose penalties. In high-profile cases like Abhijit Rajan and Rajeev Vasant Sheth v. SEBI, SAT overturned SEBI s decisions due to insufficient direct evidence of intent. This divergence in regulatory and judicial interpretation complicates enforcement efforts. In contrast, the US Securities and Exchange Commission (SEC) has broader investigative powers, including the authority to access phone records and pursue criminal prosecution in collaboration with the Department of Justice. Expanding SEBI s investigative capabilities could significantly enhance its ability to detect and prosecute insider trading effectively. newline newline