Three words that do the work
The offence has a name that misleads people: insider trading. It is not about being an insider. It is about trading on — UPSI, in the rules — and each of those three words is a test.
Unpublished: it has not been announced to the exchange (01.08.02). The moment the filing appears, the information is everybody's and you may act on it freely.
Price sensitive: knowing it would probably move the price. Results, a merger, a large order won or lost, a fraud found, a change of chief executive, a rating downgrade. SEBI's illustrative list of such events was widened in 2025, from five items to sixteen, precisely because companies were reading the short list narrowly.
Information about a listed company, held by somebody who is not supposed to be trading on it. That last part is where most people place themselves wrongly.
You do not have to work there
An insider in these rules is anyone connected to the company — a director, an employee, an auditor, a banker, a lawyer, a printer — or anyone in possession of unpublished price-sensitive information, however they came by it.
So the cousin who is told, the friend in the WhatsApp group who is forwarded it, the analyst who is let slip something in a call: all insiders, for that piece of information. Nothing about the job matters once the knowledge arrives.
Passing it on is a separate offence from trading on it. So is advising someone to trade — you do not have to name the reason, or make a rupee yourself, for it to count.
Run the three questions
Five situations. Tap each and watch which of the three tests it fails or passes.
The three questions are the shape of the test, not a legal opinion. Whether something is price sensitive, and whether a person was in possession of it, are decided case by case on evidence.
How a company is made to police itself
The rules do not rely on honesty. A listed company must keep a structured digital database of who was given unpublished price-sensitive information and when — a record that cannot be tampered with, is time-stamped, and is kept for eight years. Information arriving from outside the company must be entered within two days.
It must also shut a trading window: a period in which designated people — directors, senior staff, and their immediate relatives — simply may not trade, running up to the announcement of results and other sensitive events. That is why insiders' purchases cluster in the weeks after results and disappear before them.
So when an investigation happens, it is not a matter of proving a state of mind. There is a list, with dates on it, of who knew.
A stranger in a Telegram group posts: "Bharat Foods results out Thursday, they're excellent. Buy today." What is the position?
- Minimum penalty for insider trading
- ₹10 lakh
- Maximum
- ₹25 crore, or three times the profit — whichever is higher
- Applies to trading on UPSI, passing it on, and advising a trade
- all three
- A gain of ₹40,000 on a tip
- still meets the ₹10 lakh floor
Which of these is unpublished price-sensitive information?
If someone tells you something about a company that the market does not know, you have not been given a favour. You have been given a liability. From that moment you may not trade in that company until the information is public, and you may not pass it on. The person who told you may or may not be caught. The record of who told whom, and when, is being kept either way.
Rules decide what must be said and what may not be used. What remains is arithmetic: what this whole business costs you, in brokerage, taxes and the charges nobody mentions. That is chapter 01.09.