Mr Axe, one of the directors of XYZ Ltd, knew that bonus shares were to be announced in the next meeting and he expected the price to rise. He bought 10000 shares from the stock market. By the end of few months, price rose by Rs 9. He sold his shares and made huge profit.

(i) Name the act of Mr Axe.

(ii) Is it permitted ?

Open in App

Solution

(i) Mr Axe is indulged in insider trading. Insider Trading It means buying and selling of securities by those persons (Directors, promoters , etc), who have some secret information about the company and who wish to take advantage of such secret information. This hurts the interests of the general investors. It was very essential to check this tendency. Many steps have been taken to check insider trading through the medium of the SEBI.

(ii) Insider trading is illegal and is not permitted.

Suggest Corrections

Similar questions

Mr. Manan purchased 100 shares in a company at Rs 150 each. The company issues one bonus share for every two shares held by him. When the price of the shares fell to Rs 120 he sold the shares. Find his percentage gain.

Q. Mr. Sanjay Nehra was the Chairman of 'Taran Bank.' The bank was earning good profits. Shareholders were happy as the bank was paying regular dividends. The market price of their shares was also steadily rising. The bank was about to announce taking over of 'Vena Bank.'
Mr. Sanjay Nehra knew that the share price of 'Taran Bank' would rise on this announcement. Being a part of the bank, he was not allowed to buy shares of the bank. He called one of his rich friends Sudhir and asked him to invest

R s . 5

crores in shares of his bank promising him the capital gains.
As expected the share prices went up by

40 %

and the market price of Suhir's shares was now

R s . 7

crores. He earned a profit of

R s . 2

crores. He gave

R s . 1

crore to Mr. Sanjay Nehra and kept

R s . 1

crore with himself. On regular inspection and by conducting enquiries of the brokers involved, Securities and Exchange Board of India (SEBI) was able to detect this irregularity. The SEBI imposed a heavy penalty on Mr. Sanjay Nehra. By quoting the lines from the above pare identify and state any two functions that were performed by SEBI in the above case.

Q. Shares in Neha Ltd. was acquired by Mr.Paras at a cost of Rs.

50, 000

. During the current p.y. he got right to acquire fresh shares on the date of receiving the right entitlement intimation fair market value of existing shares held by Mr. Paras was Rs.

60, 000

. Mr. Paras sold the right paper for Rs.

75, 000

. His capital gains liability would be:

Mr. Tiwari invested Rs 29040 in $15 %$ Rs 100 shares quoted at a premium of $20 %$ . Calculate the number of shares he bought and his income from the investment.

Q. Mr/ D'souza purchased