Effectiveness of the SEBI (Prohibition of Insider Trading) Regulations, 2015: A Critical Analysis

Insider trading harms the integrity of the market, reduces the trust of investors in the market and affects price discovery. To address this issue, the “Securities and Exchange Board of India” (SEBI) has adopted a comprehensive set of regulation in India, known as the “Prohibition of Insider Trading Regulations, 2015” (PIT Regulations). This review paper critically assesses the effectiveness of these regulations, analyzing their design, how they have been applied, the means used to enforce them and the outcomes attained. The regulations are a step in the right direction towards regulating the market but this paper found certain gaps in the surveillance, investigative powers and coordination between the various market players. The study shows that the implementation steps such as detection and penalty for insider trading has enhanced, but still insider trading phenomenon exists in different forms by making use of the loopholes in the regulations and technological developments. In order to improve the effectiveness of the framework in combating insider trading, this paper proposes that the technological facilities need to be upgraded, compliance requirements need to be tightened, cross-border cooperation needs to be strengthened, and periodically there should be updates on regulations.