Market Integrity and Regulatory Response: A Critical Examination of SEBI’s Prohibition of Insider Trading Regulations, 2015

Abstract

Insider trading fundamentally imperils the integrity of securities markets by enabling asymmetric exploitation of confidential corporate information, thereby eroding investor confidence and distorting the price discovery process. In India, the Securities and Exchange Board of India (SEBI) enacted the Prohibition of Insider Trading Regulations, 2015 (PIT Regulations) as its principal legislative response to this challenge, replacing the inadequate 1992 framework with a more rigorous and comprehensive regime. This article critically examines the PIT Regulations across three dimensions: regulatory design, implementation architecture, and enforcement outcomes. The analysis reveals that while the framework has yielded measurable improvements in detection capability and penalty structure, significant structural infirmities persist particularly in surveillance technology, investigative resources, and inter-jurisdictional coordination. Insider trading continues to evolve through sophisticated mechanisms that exploit gaps in the existing regulatory perimeter. The article identifies these deficiencies and proposes targeted reforms encompassing AI-driven surveillance, institutional liability, provisional penalty enforcement, expanded cross-border cooperation, and regulatory coverage of emerging financial instruments including cryptocurrencies and decentralised finance platforms.