If you have confidential company information — information about bad financial results, a pending merger, a regulatory action — and you sell your shares during that period, you have committed insider trading. It does not matter whether you made a profit or avoided a loss. The Hon'ble Supreme Court has affirmed this position in a case involving promoters of a listed company who sold their shareholding while in possession of adverse financial information before it became public.

What Happened

The promoters of a jewellery company sold substantial portions of their shareholding while they were in possession of unpublished adverse financial information about the company. The SEBI imposed penalties for insider trading. The Securities Appellate Tribunal (SAT) set aside the penalty — holding that since the promoters had sold at a loss (the shares fell further after the information became public), insider trading was not established.

The Supreme Court restored SEBI's order. The promoters were in possession of UPSI and they traded — that is sufficient. The outcome of the trade is irrelevant.

The Legal Presumption

Under the SEBI (Prohibition of Insider Trading) Regulations, 2015, a person who is in possession of UPSI and who trades in the securities of that company during the UPSI period is presumed to have committed insider trading. The purpose for which the proceeds are used, and whether a profit was made or a loss was avoided, are irrelevant considerations once the possession and the trading are established.

What Qualifies as UPSI?

Unpublished Price Sensitive Information includes: financial results before publication, dividends not yet declared, mergers, acquisitions, or demergers under discussion, changes in key management, regulatory actions, material litigation, and any other information that would materially affect the price of the securities if made public. Any person who receives such information in the course of their duties — including directors, key employees, auditors, advisors, and their families — is an insider.

What Promoters and Company Insiders Must Know

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During any period when you possess UPSI — do not trade in the company's securities. This applies to purchase and sale of shares, derivatives, and any other security of the company.

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The argument that you lost money by selling, or that you didn't actually benefit, is not a defence. Possession + trading during UPSI period = insider trading presumption established.

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SEBI's trading window closure and pre-clearance system exists precisely for this reason — always obtain pre-clearance before any securities transaction when you may be in possession of UPSI.

Case Reference
Securities and Exchange Board of India v. Rajeev Vasant Sheth & Ors. | Hon'ble Justice Sanjay Karol & Hon'ble Justice Augustine George Masih | August 11, 2026 | Hon'ble Supreme Court of India

Frequently Asked Questions

Questions people commonly search on this topic

What is insider trading in India? +
Insider trading is the purchase or sale of securities by a person who is in possession of Unpublished Price Sensitive Information (UPSI) about the company whose securities are being traded. Under SEBI regulations, such trading is prohibited and attracts significant penalties.
Is insider trading illegal even if you made no profit? +
Yes. The Supreme Court has held that profit or loss is irrelevant in insider trading cases. The legal presumption arises from the mere combination of possession of UPSI and trading during that period — not from the financial outcome of the trade.
What is UPSI in Indian securities law? +
UPSI stands for Unpublished Price Sensitive Information — any information relating to a company that is not yet published and that would materially affect the price of its securities if made public. This includes financial results, dividends, mergers, acquisitions, key management changes, and regulatory actions.
Who is an insider under SEBI insider trading regulations? +
An insider includes any person in possession of UPSI, including connected persons such as directors, key managerial personnel, auditors, legal advisors, financial advisors, and their immediate relatives.