SEBI’s arguments HLL’s arguments• As per SEBI,” Making profit or As per HLL after the merger all losses is not a legal the shares purchased got requirement under the cancelled and so there were regulation to establish charge no financial gains to the of insider trading.” company.• "IT'S JUST NOT RIGHT": THE ETHICS OF INSIDER TRADING KIM LANE SCHEPPELE* I INTRODUCTION In his well-known book on insider trading, Henry Manne reported the 'I don't care; it's just not right."'1 By putting the ethical argument against insider trading in the mouth of someone so obviously insubstantial by his lights, Manne began the Arguments in favor of insider trading are well developed, and authors such as Manne produced extensive study to support it on many grounds. At the same time, many ethical arguments against insider trading are problematical, and many of them are dismissed on the basis of the standard ethical workings of capitalism.

"IT'S JUST NOT RIGHT": THE ETHICS OF INSIDER TRADING KIM LANE SCHEPPELE* I INTRODUCTION In his well-known book on insider trading, Henry Manne reported the 'I don't care; it's just not right."'1 By putting the ethical argument against insider trading in the mouth of someone so obviously insubstantial by his lights, Manne began the Arguments in favor of insider trading are well developed, and authors such as Manne produced extensive study to support it on many grounds. At the same time, many ethical arguments against insider trading are problematical, and many of them are dismissed on the basis of the standard ethical workings of capitalism. I. INTRODUCTION Insider trading describes any transactions in securities such as stocks and shares by persons having access to privileged information not available to the general investing public, and who stand a financial gain from this knowledge. Strictly speaking, the term insider refers This is an awkward question. There is no crime of insider trading, there is no law against it. When you read about someone being prosecuted for insider trading, the actual charge is fraud. A victimless crime is one with no obvious direct victim to

A Presentation on INSIDER TRADING Prepared by: Supervised by: Pratik Agarwal Prof. S.K. Lobwo Roll No. 318(B. Com) (Accounting & Finance) St. Xavier's 

The first main argument against insider trading is that it is simply unfair. Insiders have a clear advantage over individual investors who do not have access to the same information. By making insider trading legal, they will have the ability to exploit their advantage and generate abnormal returns. The basic argument against insider trading is that insiders should not be permitted to earn such sums at the expense of uninformed traders. Yet in almost all other markets where information is important, insider trading is well established and widely accepted. Insider trading is the practice of mainly “insiders” such as directors, managers, or employees of a certain company, trading on shares of that company for which they have confidential material, i.e. information not openly available to the public. Their main goal is to seek monetary gains, or other benefits. The argument against regulation is that insider trading adds a source of information to the market. By reacting to information earlier via insider buying or selling, a stock's price will not get terribly over- or undervalued. Moore looks at a number of arguments against insider trading — arguments rooted in fairness, in property rights, and in the risk of harm to investors — and finds most of them lacking. Moore ends up arguing — plausibly, in my view — that the real reason insider trading is unethical is that it jeopardizes the fiduciary relationships that are central to business. The argument is that allowing insider trading may encourage managers to disclose information prematurely (Bainbridge 2002) or delay disclosure in order to arrange stock trades (Schotland 1967), to delay transmitting information to corporate decision makers (Haft 1982), to pursue excessively risky projects that increase trading profits but reduce corporate value (Easterbrook 1981), to increase tolerance for bad corporate performance by allowing insiders to profit on negative developments (Cox SEBI’s arguments HLL’s arguments• As per SEBI,” Making profit or As per HLL after the merger all losses is not a legal the shares purchased got requirement under the cancelled and so there were regulation to establish charge no financial gains to the of insider trading.” company.•

succinctly summarizes the arguments for and against allowing insider trading. 1 Manne (1966) provided the classic argument against the ban on insider trading: a ban would adversely effect market efficiency and it would impede an effective way to compensate managers. The economic arguments for regulation, besides

I. INTRODUCTION Insider trading describes any transactions in securities such as stocks and shares by persons having access to privileged information not available to the general investing public, and who stand a financial gain from this knowledge. Strictly speaking, the term insider refers This is an awkward question. There is no crime of insider trading, there is no law against it. When you read about someone being prosecuted for insider trading, the actual charge is fraud. A victimless crime is one with no obvious direct victim to There are two principal harm-based arguments against insider trading. One is that the. practice is harmful to individual investors who have no insider access. The other is that: Permitting insider trading would lead to more bankrupt companies and therefore the loss of jobs. The fiduciary responsibility argument against insider trading is quite strong. Pro-arguments focus on the increased information efficiency that should arise. Intuitively, information efficiency will increase, but Pareto efficiency will decrease depending upon how quickly the information is incorporated for everyone to act upon. Do most proponents for legal insider trading assume the The court will hear arguments in Salman v. “What’s so wrong with insider trading anyway?” Markets rely on the exchange of information, after all, and that makes the line between standard I think there is a deeper and more basic argument that can be made against insider trading. I don’t think insider trading is necessarily wrong. However, I do believe that stealing (or being an accessory to the fact) is wrong. Trading on inside information is usually trading on stolen information.

The basic argument against insider trading is that insiders should not be permitted to earn such sums at the expense of uninformed traders. Yet in almost all other markets where information is important, insider trading is well established and widely accepted.

SEBI’s arguments HLL’s arguments• As per SEBI,” Making profit or As per HLL after the merger all losses is not a legal the shares purchased got requirement under the cancelled and so there were regulation to establish charge no financial gains to the of insider trading.” company.• "IT'S JUST NOT RIGHT": THE ETHICS OF INSIDER TRADING KIM LANE SCHEPPELE* I INTRODUCTION In his well-known book on insider trading, Henry Manne reported the 'I don't care; it's just not right."'1 By putting the ethical argument against insider trading in the mouth of someone so obviously insubstantial by his lights, Manne began the Arguments in favor of insider trading are well developed, and authors such as Manne produced extensive study to support it on many grounds. At the same time, many ethical arguments against insider trading are problematical, and many of them are dismissed on the basis of the standard ethical workings of capitalism. I. INTRODUCTION Insider trading describes any transactions in securities such as stocks and shares by persons having access to privileged information not available to the general investing public, and who stand a financial gain from this knowledge. Strictly speaking, the term insider refers

25 Mar 2017 EXAMPLE OF INSIDER TRADING (HLL-BBLIL MERGER) Insider trading charges against HLL with regard to its merger with Brooke Bond 

SEBI’s arguments HLL’s arguments• As per SEBI,” Making profit or As per HLL after the merger all losses is not a legal the shares purchased got requirement under the cancelled and so there were regulation to establish charge no financial gains to the of insider trading.” company.• "IT'S JUST NOT RIGHT": THE ETHICS OF INSIDER TRADING KIM LANE SCHEPPELE* I INTRODUCTION In his well-known book on insider trading, Henry Manne reported the 'I don't care; it's just not right."'1 By putting the ethical argument against insider trading in the mouth of someone so obviously insubstantial by his lights, Manne began the Arguments in favor of insider trading are well developed, and authors such as Manne produced extensive study to support it on many grounds. At the same time, many ethical arguments against insider trading are problematical, and many of them are dismissed on the basis of the standard ethical workings of capitalism. I. INTRODUCTION Insider trading describes any transactions in securities such as stocks and shares by persons having access to privileged information not available to the general investing public, and who stand a financial gain from this knowledge. Strictly speaking, the term insider refers This is an awkward question. There is no crime of insider trading, there is no law against it. When you read about someone being prosecuted for insider trading, the actual charge is fraud. A victimless crime is one with no obvious direct victim to There are two principal harm-based arguments against insider trading. One is that the. practice is harmful to individual investors who have no insider access. The other is that: Permitting insider trading would lead to more bankrupt companies and therefore the loss of jobs. The fiduciary responsibility argument against insider trading is quite strong. Pro-arguments focus on the increased information efficiency that should arise. Intuitively, information efficiency will increase, but Pareto efficiency will decrease depending upon how quickly the information is incorporated for everyone to act upon. Do most proponents for legal insider trading assume the

ETHICS OF INSIDER TRADING Insider trading is unethical and illegal because it is the theft of information that gives an insider an unfair advantage. 6. ARGUMENTS ON INSIDER TRADING It has been defended as: (a) It ensures stock prices reflect to the true value of the stock. One argument against insider trading is that if a select few people trade on material nonpublic information, the integrity of the markets will be damaged and investors will be discouraged from The main arguments supporting insider trading are that it promotes economic efficiency and enterprise. The primary argument against insider trading is that it can be a breach of fiduciary duty; the other arguments of asymmetrical information, in‐principle unequal access to information, and misappropriation seem relatively difficult to accept. The first main argument against insider trading is that it is simply unfair. Insiders have a clear advantage over individual investors who do not have access to the same information. By making insider trading legal, they will have the ability to exploit their advantage and generate abnormal returns.