Use app×
Join Bloom Tuition
One on One Online Tuition
JEE MAIN 2025 Foundation Course
NEET 2025 Foundation Course
CLASS 12 FOUNDATION COURSE
CLASS 10 FOUNDATION COURSE
CLASS 9 FOUNDATION COURSE
CLASS 8 FOUNDATION COURSE
0 votes
56 views
in GK by (240k points)
closed by
Which of the following is the reason for considering insider trading as harmful to the domestic economy and illegal?
1. It hurts the economic growth of a nation, increases inflation and Current Account Deficit (CAD).
2. It results in crash of the security markets which are so vital for channeling savings in the domestic economy.
3. Speculation by individual investors is illegal and hurts the retail investors.
4. It distorts the level-playing field between investors in the stock market and makes the markets susceptible to heavy speculation.

1 Answer

0 votes
by (238k points)
selected by
 
Best answer
Correct Answer - Option 4 : It distorts the level-playing field between investors in the stock market and makes the markets susceptible to heavy speculation.

The correct answer is It distorts the level-playing field between investors in the stock market and makes the markets susceptible to heavy speculation.

  • Insider trading is the trading of a public company‘s stock or other securities (such as bonds or stock options) by individuals with access to non-public information about the company.
  • In various countries, insider trading based on inside information is illegal.
  • This is because it is seen as unfair to other investors who do not have access to the information.

  • The Securities and Exchange Board of India (SEBI) has prescribed internal controls on sharing of information.
  • It has decided to hold company promoters, irrespective of their shareholding status, responsible for violation of insider trading norms if they possess unpublished price-sensitive information (UPSI) regarding the company without any ‘legitimate’ purpose.
  • SEBI has specified that the term “legitimate purpose” will include sharing of the UPSI in the ordinary course of business by an insider with partners, collaborators, lenders, customers, suppliers, merchant bankers, legal advisors, auditors, insolvency professionals or other advisors or consultants, provided that such sharing has not been carried out to evade or circumvent the prohibitions of these regulations.
  • Simply put, a promoter who is not an advisor in official capacity or does not hold any position on the board will not be considered a person having “legitimate purpose” to hold the UPSI.
  • It has recommended that the board of directors shall ensure that a structured digital database is maintained containing the names of such persons or entities, as the case may be, with whom the information is shared.

  • SEBI’s decision is based on the recommendations of the TK Viswanathan committee on fair market conduct.

Welcome to Sarthaks eConnect: A unique platform where students can interact with teachers/experts/students to get solutions to their queries. Students (upto class 10+2) preparing for All Government Exams, CBSE Board Exam, ICSE Board Exam, State Board Exam, JEE (Mains+Advance) and NEET can ask questions from any subject and get quick answers by subject teachers/ experts/mentors/students.

Categories

...