NLIU LAW REVIEW

Insider Trading with Special reference to the Satyam Saga

S. Harish in this article gives us an overview of the trading of Satyam stocks between 23rd December, 2008 and 5th January, 2009 i.e. a week before the Rama Linga Raju’s public revelation.

Abstract

The outflow of crucial information diminishes the confidence of the investor in the fairness and security of capital market. Insider trading specifically refers to such outflow. This research paper traces the evolution of Insider Trading and in the light of the facts presented analytically ruminates whether the Satyam saga has an insider trading chapter to it. This paper primarily focuses on the trading of Satyam stocks between 23rd December, 2008 and 5th January, 2009 i.e. a week before the Rama Linga Raju’s public revelation. The alleged trading activity has been chronologically presented and inferences from the same have been drawn. What is price sensitive information? What would constitute publication such information? Whether information allegedly leaked was unpublished price sensitive information? The paper seeks to answer such intriguing questions and thereby delve deeper into the investigation of the matter. No official complaint has yet been filed by the SEBI. The regulator is still waiting for fool proof evidences to hold that the promoters did indulge in insider trading. Media reports, which seem to be confident on Insider trading, have been elaborately discussed. Regulation 3 of SEBI (Prohibition of Insider Trading) Regulations 1992 has been elucidated to determine whether the said transactions fall within the contours of Insider Trading. The possible justifications that the institutional investors may give for losing their confidence in Satyam resulting in such massive trading have also been deliberated. As a conclusion a SWOT analysis has been done to check the adequacy of the assumption made in the research paper.