Under Section 195 Companies Act 2013, INSIDER TRADING in securities of a company by a director or KMP is:
APROHIBITED — a director or KMP shall not enter into insider trading; punishable with imprisonment up to 5 years OR fine of minimum Rs 5 lakh up to Rs 25 crore OR three times the gains made (whichever is higher), OR both
Bpermitted for all directors with no restrictions whatsoever in the Act (cf. Companies Act 2013, Section 195 — NOTE: Section 195 was OMITTED by the Companies (Amendment) Act 2017 since SEBI (Prohibition of Insider Trading) Regulations 2015 cover the field)
Cpermitted only for non-executive directors of the company, with promoters excluded (cf. Companies Act 2013, Section 195 — NOTE: Section 195 was OMITTED by the Companies (Amendment) Act 2017 since SEBI (Prohibition of Insider Trading) Regulations 2015 cover the field)
Dpermitted only with specific written consent of the Central Government (cf. Companies Act 2013, Section 195 — NOTE: Section 195 was OMITTED by the Companies (Amendment) Act 2017 since SEBI (Prohibition of Insider Trading) Regulations 2015 cover the field)
Answer & Solution
Correct answer: A. PROHIBITED — a director or KMP shall not enter into insider trading; punishable with imprisonment up to 5 years OR fine of minimum Rs 5 lakh up to Rs 25 crore OR three times the gains made (whichever is higher), OR both
1. Section 195 Companies Act 2013 originally prohibited insider trading by directors and KMPs.
2. The Companies (Amendment) Act, 2017 OMITTED Section 195 (w.e.f. 09-02-2018) because SEBI (Prohibition of Insider Trading) Regulations, 2015 comprehensively cover insider trading for listed companies.
3. The current law for insider trading in securities listed on stock exchanges is governed exclusively by SEBI PIT Regulations, 2015 (amended periodically).
4. The PIT Regulations define 'unpublished price-sensitive information' (UPSI), 'connected persons', and prohibit trading on the basis of UPSI.
5. Hence option B captures the original Section 195 framework (now omitted, replaced by SEBI PIT Regulations).
_Source: Companies Act 2013 (Act 18 of 2013), Govt. of India MCA — Companies Act 2013, Section 195 — NOTE: Section 195 was OMITTED by the Companies (Amendment) Act 2017 since SEBI (Prohibition of Insider Trading) Regulations 2015 cover the field_
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