Hindustan Unilever Ltd. vs. Securities and Exchange Board of India
Authors: Saraswat Diya 
Published: September 2023

This case is a well-established precedent in the world of insider trading. But what is insider trading? According to Upstox, Insider Trading is the act of purchasing, selling, underwriting, or agreeing to underwrite the securities or stocks of an organization by key executives/personnel of the company who have access to UPSI - Unpublished Price Sensitive Information regarding the company. In simple language, it is an illegal practice to trade in a company's securities using sensitive information that hasn't been made public. Insider trading refers to the use of this information to make an erroneous profit or loss. The information is referred regarded as "price sensitive" since it may influence the market value of a company's shares. The first legislation addressing insider trading was the Securities and Exchange Board of India ("SEBI") Act, 1992, and the SEBI (Prohibition of Insider Trading) ("PIT") Regulations, 1992 and the Companies Act, 2013 ("The Act"), Section 195 was added to outlaw insider dealing in stocks. The SEBI PIT Regulations, 2015, which were implemented in 2015, superseded the 1992 regulations to update the capital market regulatory structure. Unpublished Price Sensitive Information ("UPSI") communication and trading while in possession of UPSI are covered by Regulations 3 and 4 of the PIT Regulations, 2015, respectively. Regulation 2(1) (n) of PIT 2015 defines UPSI, as follows: “(n) “unpublished price sensitive information” means any information, relating to a company or its securities directly or indirectly, that is not generally available which upon becoming generally available, is likely to materially affect the price of the securities and shall, ordinarily including but not restricted to, information relating to the following: (i) financial results;(ii) dividends;(iii) change in capital structure;(iv) mergers, de-mergers, acquisitions, de-listings, disposals and expansion of business and such other transactions; (v) changes in key managerial personnel; and(vi) material events with the listing agreement. NOTE: It is intended that information relating to a company or securities that are not generally available would-be unpublished price-sensitive information if it is likely to materially affect the price upon coming into the public domain. The types of matters that would ordinarily give rise to unpublished price sensitive information have been listed above to give illustrative guidance of unpublished price sensitive information.” A person who works for the firm whose shares they trade is an insider. For instance, he could be one of the company's directors, presidents, or top executives who own more than 10% of the stock. Even if a person is not employed by the company, they may have access to plenty of secret information about stock performance from a genuine corporate official. Examples of N.S.E insider trading include officers, directors, and staff who trade in the company's securities after learning of significant and private business happenings and friends, co-workers, or family members of such executives, directors, and staff who traded shares after learning of this knowledge.