What is Insider Trading: Is Insider Trading Illegal in Nepal

What is Insider Trading: Is Insider Trading Illegal in Nepal: In this blog, you will learn about the provision relating to insider trading in Nepal and punishment for the offence of insider trading.


insider trading in Nepal

Table of content

  1. What is insider trading?
  2. Persons likely to be involved in Insider Trading
  3. Some examples of Insider Trading which may be legal
  4. Some examples of Insider Trading which are Illegal
  5. Is Insider trading Illegal in Nepal?
  6. Punishment for the offence of Insider Trading
  7. Conclusion


What is insider trading?

  • If any person deals in securities by himself or causes to deal in securities based on insider, unpublished and price-sensitive information. then, he shall be deemed to have been committed an offence of insider trading.
  • If any person obtains such information, he/she shall either disclose it or do not enter into a transaction based on it.

Persons likely to be involved in Insider Trading

  • Director
  • employee
  • shareholder
  • CEO/MD
  • Auditor
  • Employee of SEBON, stock exchange, Broker 
  • Employee of Nepal Rastra Bank, office of company registrar, Insurance Board
  • TV Journalist, reporters, news presenter
  • consultants

Some examples of Insider Trading which may be legal

  • A CEO of a corporation buys, 5000 shares of stock in the corporation. The trade is reported to the Securities and Exchange.
  • An employee of a corporation exercise his stock options and buys 1000 shares of stock in the company that he works for.
  • A board member of a corporation buys, 2000 shares of stock in the corporation. The trade is reported to the Securities and Exchange.

Some examples of Insider Trading are Illegal

  • A lawyer representing the CEO of a company learns in a confidential meeting that the CEO is going to be indicted for accounting fraud the next day. The lawyer shorts 2000 shares of the company because he knows that the stock price is going to go way down on the news of the indictment.
  • A board member of a company knows that a merger is going to be announced within the next day or so and that the company stock is likely to go way up. He buys 5000 shares of the company stock in his mother's name so he can make a profit using his insider knowledge without reporting the trade to the securities and exchange and without news of the purchase going public.
  • A high-level employee of the company overhears a meeting where the CFO is talking about how the company is going to be driven into bankruptcy as a result of severe financial problems. The employee knows that his friends own shares of the company. The employee warns his friend that he needs to sell his shares right away.

Is Insider trading Illegal in Nepal?

Is insider trading illegal in Nepal

Punishment for the offence of Insider Trading

If any person committed an offence of insider trading following are the punishment Imposed on him/her:

Monetary Fine or:      Equal to the amount in controversy

Max Imprisonment or:    Max 1 year

Other Punishment:    Both


Conclusion

Though Insider trading is Illegal in Nepal, Top-level officers and employees of most of the enterprises and entities have been involved in Insider trading. Even a top-level officer of the regulatory body (SEBON) is involved in Insider Trading recently. However, there is the provision of punishment to the person engaged in insider trading in the Act. But no one is punished for the offence of insider trading till now from the commencement of the Act.


(Note: "securities" means any shares, debenture or bonds. )

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