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Stock market: Insider Trading ins and outs

Posted By On 6/17/2008 12:31:00 PM
1. Are you interested to know about insider trading and if you have always wanted to know more about this topic, then get ready because we have all the information you can handle.

2. The Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 1992, say, "insider" is any person who, is or was connected with the company, and who is reasonably expected to have access to unpublished price-sensitive information about the stock of that particular company, or who has access to such unpublished price sensitive information.

3. Before we begin to give you additional information on this topic, take a moment to think about how much you already know. To understanfd the same in depth one must understand that information having price sensitivity like periodical financial results of a company, intended declaration of dividend, issue or buyback of securities, any major expansion plans or execution of new projects, amalgamation, merger, takeovers, disposal of the whole or substantial part of the undertaking and any other significant changes in policies, plans or operations of the company.

4. One point worth noting is that insider trading isn't always illegal. Trading by a company insider in its shares is not violation per se and is legal. What is illegal is the trading by an insider on the basis of unpublished price-sensitive information. Insider trading violations may also include 'tipping' such information and the person using it. Thus those trading on the basis of insider information have an opportunity to enter and exit at the correct time. Finally, when the news goes public, the stock goes back to its realistic price level.

5. Ask yourself a few simple questions to determine if you fully understand the concepts that we have went over so far and if not then read below the fate of American domestic guru and TV tycoon Martha Stewart who was sent to jail for five months and the reason for the jail was information from, Sam Waksal, that his company Imclone's cancer drug has been rejected by the food and drug administration. Before this information was made public, Stewart told her broker to sell her 4,000 shares in the company and escaped unhurt when the stock got hammered. The day after she sold the stock, it dropped 16 per cent to $46 and Stewart saved $45,673. Thus one has to be careful as for meagre gains one can land in trouble not worth the effort and If still not convinced than type in the main word from the subject of this article into any reliable search engine and you will pull up a variety of resources.

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