Trading in a company’s Shares by Directors and Employees
(who enjoy a special status when compared with the general investor) on the basis of price sensitive information and who as a result thereof are able to use their special status for individual benefit, is commonly known as insider trading.
In Order to prohibit such practice, the market regulator, the Securities and Exchange Board of India
had come out with regulations known as
SEBI (Prohibition of Insider Trading)
Under these regulations, as amended, it is mandatory for every listed company to lay down a Code of Conduct to be observed by its Directors and employees while dealing with Shares of the Company