Introduction

SEBI’s insider-trading regulations fall into two categories. Firstly, the SEBI Act, 1992, which further includes three kinds of powers that are quasi legislative, through the manner of implementing regulations; administrative, through its powers of investigation and enforcement; and lastly, quasi-judicial through its powers of adjudication, Secondly, the SEBI (PIT) Regulations, 2015, which implement restrictions on trading when in control or possession of Unpublished Price Sensitive Information (“UPSI”). The 2025^th Amendment has brought three significant changes: (a) Expansion and compliance of UPSI with LODR Material Events, (b) Strengthening the provisions related to whistleblower protection under PIT Regulations, and (c) Improving Surveillance Responses, publishing circulars, and enhancing alerts to SEBI in High-Frequency Trading Practices (“HFT”).

This report will analyse SEBI’s Insider Trading Regulations on Whistleblower Protection, Expansion of UPI, NSE’s role in HFT, and AI-driven Surveillance in Securities Markets. It will also rely on the Securities Appellate Tribunal (“SAT”) Rulings on Whistleblower Protection and UPSI norms.

Legal Framework On Insider Trading

1. SEBI Act, 1992[1]

The SEBI Act, 1992, is considered the backbone of Insider Trading regulation. The powers to investigate Insider Trading, issue directions, and protect investors, including the ex parte interim orders which are essentially required to curb market abuse, are set out in sections 11[2], 11B[3], and 11C[4] of the SEBI Act, 1992. The cease-and-desist orders are mentioned under Section 11D.[5] Section 15G[6] is a punitive provision as it imposes penalties on those involved in Insider Trading. It further prescribes that violators face a penalty of ? 10 Lakhs to ? 25 Lakhs, or three times the gain derived from such violation, whichever is higher. Section 15-I[7] mentions Insider Trading as a subject matter of civil law, and the evidence must be administered through the principle of “Preponderance of Probabilities.” Moreover, SEBI’s powers are wide but unbounded, which underscores the need for interim orders to be reasonable and supported by strong evidence.

2. SEBI (PIT) Regulations, 2015[8]

The Regulations mandate a clear prohibition on trading “while in possession of UPSI,” whether there was an ill motive or an actual misuse is totally immaterial. They also restrain the communication of UPSI unless legitimate purposes are not involved. They provide a code of conduct for certain concerned persons and a code of practice for fair disclosure. They want a list of concerned entities to maintain regulated databases, codes of fair disclosure, etc.

3. Enlargement and compliance of UPSI with the LODR Schedule III

Initially, the companies made the list of UPSI events conclusive, but after the SEBI Board Approvals in 2024 and the floating of several notifications in 2025, SEBI has made the list illustrative. It has enlarged UPSI to align with the LODR Schedule III[9] and Regulation 30.[10] The gist of the list includes changes in Key Managerial Personnel (“KMP”) beyond superannuation, fundraising recommendations, agreements, fraud or arrests, etc. The list has been effective post June 2025 and is deemed a better approach due to its ability to prevent uncertainty between material disclosure norms and insider trading regulations. Companies must treat the LODR events as UPSI from the beginning till their public announcement. Failure to comply will attract penalties under Regulations 3[11] and 4[12] of PIT, 2015.

The Jurisdictional Overlap between SEBI and NCLT

The Apex Court in IFB Agro Industries Ltd.[13] has clarified that matters related to the Insider Trading fall within SEBI's jurisdiction and cannot be shared with the NCLT.

 

Whistleblower Protections And 2025 SAT Reforms

The SAT possesses appellate jurisdiction against SEBI orders under Section 15K of the SEBI Act, 1992.[14] Whistleblower Protection is derived from a “vigil mechanism” deeply embedded in Section 177[15] of the Companies Act, 2013, which allows reporting of corporate liability, including fraud, misconduct, and other offences. Additionally, PIT, 2015[16], also provides a portal for reporting insider trading. However, strong legal protections are still questioned in India when compared to the global level (For Example, the US SEC’s Whistleblower Program[17]).

SAT Rulings

There have been several cases in which SAT has sought to provide safeguards for whistleblowers. In the ICICI Bank Case, 2022,[18] the employee faced several threats and harassment for reporting insider trading through the internal mechanism. The issue was later resolved through a settlement, in which SEBI emphasised Regulation 22(2) of the LODR Regulations, which deals with whistleblower protection. Through the settlement, SEBI recovered ? 28 Lakhs from the bank, making it liable for insider trading.

In another case against Sun Pharma Ltd.,[19] SEBI recovered ?56 Lakhs from the Company following a whistleblower complaint. Likewise, in the Shankar case,[20] the SAT has provided protection to compliance officers from liability for corporate fraud, ensuring they cannot be held liable for the wrongdoing of the company’s promoters or directors.

In Para 9 of the Arvind Natarajan Case, the court stressed that complaints received from whistleblowers are a vital source of information for SEBI, assisting it in properly carrying out its duties in the securities market. Such information has helped reveal violations that might otherwise remain hidden. The identity of whistleblowers is very important to protect, or else they would feel discouraged by the harm and retaliation they may face. Therefore, maintaining whistleblowers' confidentiality is essential to prevent insider trading. Additionally, the Delhi High Court in 2025 ruled that the regulations SEBI uses to administer insider trading are excluded from the Right to Information under the RTI Act, 2005.[21] This helps ensure the confidentiality and privacy of the Whistleblower’s identity and saves them from being victimised.

The Initiatives taken by SEBI for Whistleblowers

1. The positive approach of providing rewards by SEBI in the year 2019

Under SEBI (PIT) Regulations,[22] if any person discloses original information through the voluntary disclosure form, SEBI provides them a reward of 10% for reporting the complaint. The maximum reward has now been escalated to ? 10 Crores, up from the previously considered ? 1 Crore. The regulation has also emphasised the anti-retaliation mechanism for those employees who file a voluntary disclosure. Further, the regulation that classifies a whistleblower as an “informant” has strengthened their status by imposing confidentiality requirements and preventing them from being victimised or harassed.

2. SEBI (LODR) Regulations

Under these regulations, guidelines were issued for every corporate entity to have a Market Infrastructure Institution (MII) where if the Audit Committee fails to take any appropriate action on a Whistleblower Complaint for the span of 60 days, then after such lapse of time, the matter must be moved to MII which will ensure that the action is taken and whistleblowers are not discouraged. After April 2025, every MII must have its own internal whistleblower policy.

However, the challenges still lie in several factors of such a mechanism. One of them is the quantum of vexatious complaints. Even though SEBI can take severe action against such informants, there must be an effective mechanism and additional resources to determine whether such information is bona fide. Secondly, the discussion paper mentions confidentiality, but they can also be considered as witnesses to a case. The apparent risk to whistleblowers and the Legal Representatives' obligations in such cases are not fully discussed. Lastly, the internal whistleblower mechanism should be supervised by SEBI to ensure that whistleblowers are not harmed.[23]

Understanding UPSI Norms Through Its Statutory Provision And SEBI Rulings

The term UPSI is defined under Regulation 2(1)(n) of SEBI (PIT) Regulations, 2015,[24] which further mentions that “any information, relating to a company or its securities, directly or indirectly, that is not generally available, which, upon becoming generally available, is likely to materially affect the price of the securities, and shall, ordinarily, including but not restricted to, information relating to the following:

1. Financial Results;
2. Dividends;
3. Change in Capital Structure;
4. Mergers, de-mergers, acquisitions, delistings, disposal, and expansion of business and such other transactions;
5. Changes in KMPs;
6. Materials events in accordance with listing agreement.”

While, on the other hand, “generally available information” under Regulation 2(1)(e)[25] defines information accessible to the public without discrimination.

In Apex Frozen Foods Ltd.,[26] the company shared its internal sales and purchases with its members and auditors. It was done as a practice before finalising the account. However, ten days before the board meeting, it was realised that the unaudited results were not viable. The SEBI, in this case, held that the UPSI Period first data for the relevant quarter would be taken into consideration, as by the end of the quarter, the management of the company could have known whether the company had made any profit in the FY.

In Para 15 of Celebra Integrated Technologies Ltd.,[27] the SAT has ruled that the contention raised by the appellant that the information was disclosed to the public on 11 October 2008 and doesn’t constitute UPSI stands rejected. It stated that merely informing the stock exchange that the board would be holding a meeting on dividends and profits doesn’t actually constitute disclosure of the actual figures or rights issue details. As per Regulation 2(ha), price-sensitive information includes financial results, which have a broader scope. Since the company's internal operations were limited to certain key members, including the executive chairman, Mr. Manoj Gaur. So, the UPSI still existed on 11 October 2008, as it was in the chairman's possession and not disclosed to the public. Likewise, in Lux Industries Ltd.,[28] the financial results began on 20th April, 2021, indicating that the UPSI period commenced on the aforesaid date and ended on 25^th May, 2021. The SEBI considered the UPSI start date valid because the company's management could access the financials through the company's email submissions.

Market Manipulation Trends From NSE Data

1. The Renowned Jane Street[29] Case on Market Manipulation

Before beginning with this infamous case, the context should be understood through its history. The NSE Co-location Scam[30] involved selected brokers using operations to front-run others in the market. These practices rooted them in earning a hefty profit. Similarly, the Jane Street Case is considered a landmark as it involved a US HFT and a trading expertise firm named Jane Street. In 2025, SEBI inspected Jane Street and restrained them from entering Indian markets on the grounds of alleged manipulation in NSE’s derivatives markets.

According to SEBI’s findings, there has been continuous manipulation from 2023 to 2025, resulting in substantial profits for Jane Street. It was also found that the manipulation involved huge trades in derivatives markets, resulting in net profits of around ? 36,500 crores before SEBI confiscated ? 4,843 crores as unlawful gains.

The 2025-26 data has revealed intraday index manipulation. Large entities often implement rigorous morning purchases (often equal to or more than 20%) in the index. Even the Bait-and-switch option has been used by manipulators when the retail traders follow upward momentum. These are the short put options that are used when the index crashes.

2. Volume Weighted Average Price

The manipulators pinpoint the Volume Weighted Average Price (“VWAP”) for the index settlement during the final 30 minutes of trading. By going through proximate trades, they force settlement prices to favour their derivatives. This mechanism, which is followed by manipulators, is also called “marking the close.” This is a strong tactic because it puts pressure on the final price in the last hour.

Recommendations On AI Surveillance In Securities Markets

The SEBI’s Integrated Market Surveillance system is governed by Regulation 11 of the SEBI (Stock Brokers and Sub-Brokers) Regulations, 1992, which uses AI-driven algorithms to identify unusual trading patterns that directly link to breaches of Insider Trading regulations[31]. AI-driven mechanisms help in recognising insider trading in listed companies. However, certain recommendations are required to operationalise AI for detecting insider trading. Those recommendations are as follows:

1. Adopting Machine Learning Algorithms for Identifying Insider Trading

Machine Learning Models, like XGBoost, have a strong probability of identifying insider trading with 97?curacy. Other models, such as Random Forests, have been used to categorise trading behaviour and to identify unusual structures in trade data. This shows that for complex trade features, technology is a must-have rather than a human mindset.

2. Incorporation of LSTM networks in AI Surveillance for SEBI/NSE

The incorporation of an algorithm that can interlink trading with the UPSI lifecycle would help resolve cases of insider trading. Time Series Models, such as LSTM networks, can help identify deviations from the trader’s prior behaviour.

3. Implementation of context-aware anomaly detection systems

The regulators should include a context-aware anomaly detector, which should be used through unregulated learning algorithms such as Autoencoders and Isolation Forests. These detectors can be used to sharply distinguish between genuine volatility and illegitimate price spikes.

4. Incorporation of Entity Resolution Graph in the AI algorithm

The Entity Resolution Graph, or Cross-Market Graph, would help monitor cash, futures, and options markets. Such graphs will help coordinate HFT strategies that affect index elements.

Conclusion

The Insider-Trading Regulations, governed by the SEBI Act, 1992, and the SEBI (PIT) Regulations, 2015, have been modified by the 2025 Amendments. The alignment of UPSI norms with the LODR Schedule III has helped curtail ambiguity in material disclosures to a large extent. The SAT Rulings have given importance to whistleblower protection by reiterating the principles of anti-retaliation, confidentiality, and rewards.

The NSE Data has helped identify Market Manipulation through alterations in derivatives, VWAP, and losses to retailers. These issues demonstrate that the traditional method of surveillance would be unable to address them and call for urgent adoption of AI-Driven Surveillance, where specific algorithms can help identify suspicious activity in the current trade compared with the previous trade. Even though the 2025 amendments have come into effect, certain challenges still lie ahead regarding the implementation and use of AI, one of which the Securities Market will face in the future. Therefore, SEBI’s framework is Salus Populi, that is, the welfare of investors remains the sole objective of securities laws.

*The author is Arpeeta Dash, a B.A.LL.B.(Hons.) student at Symbiosis Law School, Nagpur . Views expressed are personal.