Invisible Insiders: How Beneficial Ownership Structure of FPIs Weakens India’s Insider Trading Regime

Insider trading refers to an act of trading of securities through unpublished Price Sensitive Information, which can eventually lead to disruption of market and unnatural gain for the insider. Such kind of trading based on non-published information leads to disruption in the market and thus is a considered to be a prohibited practice and regulated by the Securities and Exchange Board of India, that has been, under the SEBI Act 1992, bestowed with the powers to establish rules and regulation that prohibits such malpractices. Though there have been multiple regulations established by the SEBI to regulate insider trading, still there are certain lacunas that prevail that can disrupt the stock market. This article primarily focuses on how the insider trading which when facilitated through Foreign Portfolio Investors (FPIs) who are entities established outside of the territory of India and invest through beyond such territories in the Indian securities Market have a multi-layered established trading regime which leads to an opaque framework in functioning which results in insider trading being conducted through such hidden actual beneficial owners. Such lacunas need to be focused upon and provided suggestions for, so as to ensure a stable and better securities market to be established in India. Key Words: Insider Trading, Unpublished Price Sensitive Information, Opaque Ownership, Beneficial Owner, Foreign Portfolio Investors, Securities and Exchange Board of India.