In the pursuit of achieving the objective of ending insider trading from Indian markets and preserving the interests of investors, SEBI has frequently come up with rules and regulations. To fulfil these objectives, the Security and Exchange Board of India has wide-ranging powers to make progress towards this goal, including measures for the prohibition of the practice of insider trading. It made its first attempt with the introduction of the ‘SEBI (Prohibition of Insider Trading) Regulations 1992’ using the powers conferred under Section 11 and Section 30. The Act prohibited trade done by an insider of the company in question with the help of unpublished price sensitive information. This gave SEBI the authority to initiate criminal prosecution against the accused, cancel the certificate of registration along with the issuance of certain orders. 

To make it harsher and more effective, provisions were added to the Act and Regulations. The amendment was made in 1995 with the addition of Section 15G which gave additional powers to the Security and Exchange Board of India to impose penalties on entities who are found to be involved in insider trading with the help of Unpublished Price Sensitive Information. The magnitude and the nature of the liability which could be enforced by this newly added section, 15G, was interpreted in ‘Rakesh Agrawal v. SEBI’ by SAT. It was observed in the given case that the accused cannot be punished under the section even though it was proven that he/she was involved in insider trading because the presence of ill motive was essential for the entity to be punished under the provision. The person should commit the act of insider trading to gain unfair advantage or profit. 

Furthermore, in another case ‘Rajiv B. Gandhi v. SEBI’, it was observed that for a person to be held liable under Section 15G of this Act, it has to be proven that the particular act of insider trading was motivated by Unpublished Price Sensitive Information. The tribunal stated an example of insider trading with good motives in the following lines: 

“If an insider who sold the shares were to plead that he wanted to raise funds to meet an emergency in his family say, the marriage of his daughter or bypass surgery of a close relation and could establish that fact, it would be reasonable to hold that even though he had unpublished price sensitive information, the motive of the trade was to meet the emergency. He would not be guilty of the charge of insider trading.”

The above-mentioned cases were handled by the Tribunal under the non-amended PIT Regulations 1992 before they were amended in 2002. However, it is important to know that the law related to insider trading underwent a complete overhaul via the amendment in 2002, according to which insider trading was prohibited if it was done by an insider ‘..while in possession of UPSI’. In a way, it was decided to change the approach to a more strict liability approach.