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Under regulation 4(1) of the SEBI (Prohibition of Insider Trading) Regulations, 2015, which statement about an insider’s trading in listed securities is correct, subject to the defences in the…

Question and options

Under regulation 4(1) of the SEBI (Prohibition of Insider Trading) Regulations, 2015, which statement about an insider’s trading in listed securities is correct, subject to the defences in the regulation?

  1. An insider may trade in the securities if the trade earns no profit and avoids no loss

  2. An insider may trade in the securities unless SEBI first proves that the information motivated the trade

  3. An insider may trade in the securities at any time outside a trading window closure under the company’s code

  4. An insider in possession of unpublished price sensitive information may not trade in the securities

Answer and explanation

Correct answer: D - An insider in possession of unpublished price sensitive information may not trade in the securities

Regulation 4(1) of the PIT Regulations bars an insider from trading in listed or proposed-to-be-listed securities when in possession of unpublished price sensitive information; such trades are presumed to be motivated by it, and the insider must prove a defence. Profit or loss is irrelevant, and the bar is not confined to a trading window closure.

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