Insider trading

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gemini (Querist)

22 January 2009 Hi Friends,

I am new to commerce.

Kindly tell me about insider trading from the scratch. I dont know the basics of the commerce also.

Thanks.

Deepak Agrawal

Deepak Agrawal (Expert)

22 January 2009 Insider trading means the trading done on basis of sensitive information. Also that information is not known publicly...

It means misusing the information which is not yet published publicly or secret information...

For ex: U are an auditor of XYZ ltd & u know that company will going to declare dividend. But the information is not yet published. In order to get dividend, u purchase the shares & earn dividend...

The above example is very small... Practically huge things are considered

gemini

gemini (Querist)

23 January 2009 Hi Deepak,

Thank you very much.

Its very simple for understanding.

In my understanding from your answer is that 'its based on the sensitive information known only to somebody probably the employees or directors of the XYZ ltd which is unknown to the public inorder to get the advantage of the future palns or to escape from the coming disaster of that company '.

Correct me if i am wrong.

Thank you once again.

CA.Tarun Maheshwari

CA.Tarun Maheshwari (Expert)

23 January 2009 Dear Gemini, You are correct to a certain extent. But it is not such an easy job. SEBI imposes a very heavy penalties on insider trading which is in crores.

gemini

gemini (Querist)

23 January 2009 Dear Tarun,

Thank you very much.

I want to know the following information also. Kindly clarify me.

what is the cause of insider trading to the public who are having that particular companies shares?

Thanks again.

Deepak Agrawal

Deepak Agrawal (Expert)

23 January 2009 Having sensitive information & greed to earn money is the cause

CA.Tarun Maheshwari

CA.Tarun Maheshwari (Expert)

23 January 2009 The general public always suffers loss. thats why SEBI has provided for penalties. But practically, small shareholders always bear losses in this scenario. As you can see from the case of Satyam also. It is the small investor who is bearing the heavy losses because the share price of satyam has fallen to the earth. We are the common man of India. and Common man always suffers. Just wait and watch.

gemini

gemini (Querist)

23 January 2009 Hi Friends,

Thanks for your kind reply.

It helped me a lot.

I can understand about the insider trading.

Thanks again.

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