TO BE OR NOT TO BE INCLUDED: WHETHER ‘TRADING’ INCLUDES ‘PLEDGING’ UNDER THE PURVIEW OF THE PROHIBITION OF INSIDER TRADING REGULATIONS

Abstract

Abstract

The dynamic nature of Securities law which seeks to protect the interests of the investor and develop the market has raised an intriguing question of whether the term ‘trading’ under the Prohibition of Insider Trading Regulations of 2015 includes within its purview ‘pledging’, brought to the forefront by the Satyam scam ruling. This research article endeavours to argue both sides of the ensuing debate considering the tenets of rules of interpretation, use or mere possession of unpublished price sensitive information (UPSI), presence of unlawful motive and the requirement of disclosures of such transactions with the aim of displaying that the law requires not merely definitional clarity but also additions in order to be equipped to prevent the illegitimate of such transactions as compared to those which are conducted in the ordinary course of business with bonafide intentions. Neither a blanket prohibition of such transactions could be the intent of the authorities as that would draw the market to a standstill nor can allowing a clear loophole which acts as a device of deviance be permissible and thus, there is a need to draw a balance between the arguments put forth on both ends of the debate, to allow for the regulations to be triggered but on a certain test being met with and with caveats accounting for the nature of such transactions.

Keywords: Dealing, Pledging, UPSI, Unlawful Motive, Satyam Scam, Disclosures.