Sunday, March 7, 2021

What is "Insider trading" ?

What is Insider trading ? Stock market, Trading, Invest, Investing, Investment.

A "Trade or an Investment" made, knowing the information which was not publicly available is known as “Insider Trade”.

It is unethical and prohibited because it breaches trust of the general public who do not have access to the inside information.

That being said many big names are accused of such practices because the penalty is mainly monetary.

Recently Franklin Templeton executives have been asked to come before "SEBI" in order to clarify potential insider trading in the mutual fund schemes during the March 2020 Crash.

Any related party to the company has to inform the stock exchange before placing such orders.

The trades can also be placed before a month or so in order to avoid it being called an "Insider trade".

The best practice however for the related parties is to inform the exchange before taking any such trade and take a trade after the information has been released publically.

This rule was made in order to avoid the stock "Pump and Dump" strategy wherein one could have simply bought the shares before the information was made public and dumped it after the information was released.

This thing still goes on but "SEBI" is more stringent than ever and keeps a watchful eye on the market players to avoid such practices which are not in favor of the long term growth of the market.

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