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Prohibition on insider trading of securities (Section 195 of the Companies Act, 2013)

Prohibition on insider trading of securities (Section 195 of the Companies Act, 2013) :

Section 195 of the Companies Act, 2013 came into force on 12th September, 2013 provides for Prohibition on insider trading of securities. According to this section:

(i) No person including any director or key managerial personnel of a company shall enter into insider trading. But if any communication is required in the ordinary course of business or profession or employment or under any law, then the above prohibition does not apply.

(ii) “Insider trading” means—

(a) an act of subscribing, buying, selling, dealing or agreeing to subscribe, buy, sell or deal in any securities by any director or key managerial personnel or any other officer of a company either as principal or agent if such director or key managerial personnel or any other officer of the company is reasonably expected to have access to any non-public price sensitive information in respect of securities of company; or

(b) An act of counselling about procuring or communicating directly or indirectly any non-public price-sensitive information to any person;

(iii) “price-sensitive information” means any information which relates, directly or indirectl y, to a company and which if published is likely to materially affect the price of securities of the company.

(iv) If any person contravenes the provisions of this section, he shall be punishable with imprisonment for a term which may extend to five years or with fine which shall not be less than five lakh rupees but which may extend to twenty-five crore rupees or three times the amount of profits made out of insider trading, whichever is higher, or with both.


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