INSIDER TRADING AND ITS IMPACT ON CORPORATE GOVERNANCE PRACTICES IN INDIA: A LEGAL AND REGULATORY ANALYSIS
AUTHOR – ANIKET LODHI, STUDENT AT UNITEDWORLD SCHOOL OF LAW, KARNAVATI UNIVERSITY, GANDHINAGAR, GUJARAT
BEST CITATION – ANIKET LODHI, INSIDER TRADING AND ITS IMPACT ON CORPORATE GOVERNANCE PRACTICES IN INDIA: A LEGAL AND REGULATORY ANALYSIS, INDIAN JOURNAL OF LEGAL REVIEW (IJLR), 6 (7) OF 2026, PG. 789-798, APIS – 3920 – 0001 & ISSN – 2583-2344.
ABSTRACT
Insider trading is a major regulatory concern for securities markets in emerging markets such as India, in terms of preventing insider trading for ensuring market integrity, efficiency and transparency. It violates the concept of market efficiency by enabling certain persons, like directors, employees or related persons to use unpublished price sensitive information (UPSI) to trade securities. This doctoral thesis reviews regulatory and legislative provisions relating to insider trading in India and assesses how it affects corporate governance.
The analysis is mainly confined to the role of the Securities and Exchange Board of India (SEBI) – the primary regulatory body established under the Securities and Exchange Board of India Act, 1992. It also assesses the impact of the SEBI (Prohibition of Insider Trading) Regulations, 2015, which constitute a robust framework to curb the misuse of UPSI and ensure equity in the trading practices of companies. This study examines the progression of insider trading regulations in India from the early disclosure-based approach under the Companies Act, 1956 to the current “enforcement” approach.
The paper further examines the links between insider trading and corporate governance. The presence of effective regulatory measures, including disclosure norms, trading bans, codes of conduct, and compliance frameworks, are vital to improving the corporate governance structure by increasing accountability, transparency and integrity. The paper provides insights into how enforcement by SEBI helps improve corporate governance through prevention of fraudulent activities and enhancing investor trust.
Nonetheless, despite clear legal framework, there are challenges in enforcing insider trading laws. These challenges include proof problems, technological progress enabling covert forms of communication, and cross-border trading. This paper critically examines these issues and stresses the importance of ongoing regulatory reforms, enhanced monitoring mechanisms and global cooperation.Overall, the study underscores that effective insider trading regulation is indispensable for maintaining fair securities markets and fostering long-term investor trust in India’s financial system.
Keywords- Insider Trading, Corporate, Governance, Unpublished Price, Sensitive Information, Securities Market Regulation and Investor Protection