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Insider trading is an evil by which any stock market is infected to cause grave damage to the common investor. It erodes the confidence of the investor and undermines its credibility. It is often said that insider trading is not as rampant in any other stock market in the world as in the Indian market. By the promulgation of the Regulations, SEBI attempted to give a concrete shape, by a legislative measure, to one of the specific functions which section 11 of the Securities and Exchange Board of India Act, 1992 requires SEBI to discharge. The object of this measure is to prevent and curb the menace of insider trading in shares. In the UK, in Lord Lane’s view, the rationale behind the prohibition on insider trading is “the obvious and understandable concern … about the damage to public confidence which insider dealing is likely to cause and the clear intention to prevent so far as possible what amounts to cheating when those with inside knowledge use that knowledge to make a profit in their dealing with others.”1 An International investment expert as reported by Associated Press from New York, Raj Rajaratnam, the hedge fund billionaire at the center of the biggest insider-trading case in U.S. history, was sentenced to 11 years behind bars — the stiffest punishment ever handed out for the crime. “His crimes and the scope of his crimes reflect a virus in our business culture that needs to be eradicated,” U.S. District Judge Richard J. Holwell said, “Simple justice requires a lengthy sentence.” The judge called it “an assault on the free markets that are a fundamental element of our democratic society. There may not be readily identifiable victims, but when the playing field is not level, the integrity of the marketplace is called into question and the public suffers.”Almost all countries having organised stock exchanges have laws dealing with insider trading. In India, by the promulgation of the Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 1992 (“the Regulations” for short), SEBI attempted to give a concrete shape, by a legislative measure; to one of the specific functions which section 11 of the Securities and Exchange Board of India Act, 1992 (“the SEBI Act” for short) requires SEBI to discharge. The object of this measure is to prevent and curb the menace of insider trading in securities. To remedy the malady of insider trading, the Regulations provide for various measures. In particular, the Regulations render insider trading a criminal offence in certain circumstances, punishable under the SEBI Act.