India’s Regulatory Crackdown on Insider Trading
India’s markets regulator is tightening its grip on insider trading as illicit stock market gains surge, pushing companies to strengthen their compliance and disclosure practices. The Securities and Exchange Board of India (Sebi) recently ordered the impounding of unlawful gains exceeding ₹1,173 crore after uncovering insider trading involving a Central Electricity Regulatory Commission (CERC) official and shares of Indian Energy Exchange Ltd (IEX). This unprecedented figure dwarfs earlier instances, such as the 2020 Bank of Rajasthan case where insiders made illegal gains of ₹1.95 crore during the company’s acquisition, and the 2022 Lux Industries case, which involved ₹12.94 crore from trades based on financial results. A notable case in 2024 related to Infosys Ltd saw leaked earnings data lead to gains of ₹15.7 crore.
This escalation in illegal financial gains coincides with a sharp rise in regulatory scrutiny. Sebi initiated 287 insider trading investigations in FY25 and passed final orders in 15 cases. In 2023-24, Sebi initiated 175 investigations and passed orders in 23 cases, significantly up from 85 investigations and 18 orders in 2022-23. So far in 2025-26, between April 1 and October 15, Sebi has passed orders in 12 cases of insider trading.
Legal experts attribute the enhanced drive against insider trading to amendments made to the Sebi (Prohibition of Insider Trading) Regulations in March, which significantly expanded the definition of what constitutes Unpublished Price Sensitive Information (UPSI). According to Ragini Singh, a partner at ThinkLaw Advocates, “The 2025 amendment has substantially expanded the scope of what must now be classified as UPSI.” Corporate events such as awarding major contracts, fundraising plans, and changes in credit ratings are now explicitly defined as price-sensitive.
Sebi’s recent orders highlight the impounding of unlawful gains associated with insider trading by CERC officials. Alay Razvi, managing partner at Accord Juris, noted that investigations are now faster and broader in scope, often including coordinated search-and-seizure operations, digital evidence collection, analysis of options positioning, and rapid interim measures.
While the regulatory changes aim to improve market integrity, the expanded definition of UPSI has made compliance more operationally demanding. Razvi explained that Sebi’s rules now encompass a wide array of corporate activities, from initiating forensic audits to obtaining key regulatory approvals. “The idea is to align UPSI classification more closely with Listing Obligations and Disclosure Requirements (LODR) materiality standards,” Razvi said. Under LODR, listed companies must adhere to specific rules regarding information disclosure to ensure transparency and protect investors.
Sebi’s evolving enforcement model against insider trading is becoming increasingly preemptive. “Sebi’s actions are now targeting high-value, sophisticated arrangements such as derivative trades, insider leaks, and event-driven transactions,” said Singh from ThinkLaw Advocates. Technology plays a key role in this crackdown; Sebi’s enhanced surveillance systems now correlate trading patterns, disclosures, and external data sources to identify anomalies at scale.
Although this allows for faster investigations, certain grey areas remain. Razvi pointed out, “The biggest grey zones involve timing and materiality judgments.” It is not always clear when a multi-stage negotiation or investigation transitions into a case of insider trading, creating significant compliance risks.
However, the industry is adapting to the tighter supervision through internal tightenings and external collaborations. Companies are upgrading their digital databases and refining access controls, while intermediaries like investment advisers are expanding their compliance teams to keep pace with Sebi’s heightened inspection and enforcement. Rizvi concluded, “The overall trend is a shift from reactive compliance to proactive governance.”
