What Is Insider Trading?

Insider trading is buying or selling a listed company’s securities while in possession of Unpublished Price Sensitive Information (UPSI) — material information not yet public. It’s illegal because it’s fundamentally unfair to other investors.

What counts as UPSI

Information that, if made public, would likely move the share price — such as unannounced results, a merger, a large order, a major regulatory action or a management change. An "insider" is anyone with access to such information: employees, directors, promoters, auditors, and people connected to them.

Why it’s banned

Markets work only if everyone trades on the same publicly available information. If insiders could profit from secret knowledge, ordinary investors would always be at a disadvantage and trust in the market would collapse. SEBI’s prohibition protects a level playing field.

How SEBI tackles it

• Prohibition of Insider Trading (PIT) regulations ban trading on UPSI and require insiders to maintain confidentiality.
• Trading windows — companies close trading windows for insiders around sensitive events (e.g. before results).
• Disclosures — insiders must report their trades, and companies maintain structured digital databases of who accessed UPSI.
• Surveillance and enforcement — SEBI investigates unusual patterns and can impose heavy penalties and bans.

For ordinary investors

You don’t need to worry about accidental insider trading from public news — the rules target those with genuine access to non-public information. Just trade on information that’s already public. Education only, not legal advice.