Open Access Research Article
Corporate Governance In India: Impact Of Good Corporate Governance On Insider Trading (By Arushi Jain)
Published Paper
Article Details
This paper examines the ability of the insiders to use the non-public,
confidential information in order to extract rents from the shareholders of the
company. Corporate governance shall appear as limited control over the company
if an Insider trading transaction is deemed undesirable or illegal by a shareholder or the
regulators. The laws regarding insider trading have been significantly added
strength and support over the past few years. SEBI also gained broader
enforcement powers given the potential for insider trading to seriously
compromise market integrity. The decisions of the SEBI, the enforcement of the
SEBI, and the judgments of various courts have highlighted the need for
businesses to take the issue of insider trading seriously.
The main idea of the securities rules is to implement
the goal that all investors should have equal access to rewards for
participating in securities trading. This means that all investor
representatives must be exposed to the same market risk and must have the same
amount of information available to them . Injustice based on unequal access to
knowledge should not be ignored as an inevitable part of our way of life.
Therefore, it is important that the market is free of all types of fraud,
especially insider trading. This prevents the regular investor from running the
market as if they were invited to play with someone loaded with information.
Unfortunately, India is not the only country with major fraud exposed, but the
corporate concept of good governance has been defeated. As a result, the
government shifted to micromanagement and over regulation by way of turning
good governance into legislative provisions. We tend to forget that
micromanagement cannot eradicate fraud. This can only be mitigated by effective
enforcement of the law, which should ban overt violations of the law. Corporate
Governance Standards are the responsibility of company managers. Regulators are
required to set out in Rule a list of additional procedures for limiting
insider trading opportunities. What is to be stipulated must be a statement of
the annual report of compliance with the
standards set out. Therefore, in effect, any company that does not comply with
the Corporate Governance Principles shall be punished by its shareholders. It
can be said that insider trading is hugely affected by corporate governance.
The principles of good corporate governance were focused at fulfilling the key
function of separating company agents and managers, and also the management of
the company and its board of directors, and most agency issues were related to shareholders
and managers.
The independence of the board of directors affects insider trading in a
company, the board of directors made out of independent directors are more
likely to protect the interest of the shareholder of the company from insider
trading than those made up primarily of the corporate insider and affiliates as
the outsider- dominated board gives a better control over the managers of the
company. The independent directors are more motivated to keep a check on the
management as for them the external interests like reputation is at a higher
pedestal than their benefits.
Article Information
Corporate Governance In India: Impact Of Good Corporate Governance On Insider Trading (By Arushi Jain)
Author
Name:
Title:
Insider Trading.
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- Journal IJLRA
- ISSN 2582-6433
- Published 2022/04/21
About Journal
International Journal for Legal Research and Analysis
- Abbreviation IJLRA
- ISSN 2582-6433
- Access Open Access
- License CC 4.0
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