America built the same machine out of different parts, and the parts have different names, different edges and a much larger body of case law.
The foundation is Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 made under it. Together they make it unlawful to employ a scheme to defraud, to state an untruth or omit a material fact, or to engage in any practice that operates as a fraud, in connection with the purchase or sale of a security. Nothing in that text mentions insider trading. The entire American law of it is judge-made, built out of the word "fraud", and that origin explains its shape: an American case needs a deceived party and a breached duty, where an Indian case needs possession.
What are the theories of insider trading liability?
Two theories carry it. Under the classical theory, from Chiarella v. United States (1980), a corporate insider who trades on material nonpublic information defrauds the shareholders on the other side, because a relationship of trust and confidence exists between them. Someone with no such relationship commits no fraud by trading on what he pieced together, and Chiarella himself, a printer who deduced takeover targets from documents he was setting in type, went free.
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Tippee liability, from Dirks v. SEC (1983), is derivative. A tippee inherits the tipper's duty only if the tipper breached a duty for a personal benefit and the tippee knew or should have known.
What counts as a personal benefit was settled in Salman v. United States (2016). A gift of confidential information to a trading relative or friend is itself the benefit, which closed the loophole a purely pecuniary reading had opened.
Under the misappropriation theory, from United States v. O'Hagan (1997), a person defrauds the source of the information rather than the counterparty. A lawyer at a firm advising an acquirer, trading in the target's stock, owes the target's shareholders nothing and his own firm and its client everything. Using their confidential information for his own trading is the deception, and it is "in connection with" a securities transaction because that is what he used it for.
The consequence for a buy-side analyst is worth stating twice, because this is the case people get wrong. The classical theory does not reach a hedge fund analyst who is not an insider of the issuer. The misappropriation theory does reach him whenever the source of the information is a principal he owes a duty to: his employer, a client, a counterparty under a confidentiality agreement. Someone who trades personally on his own firm's unpublished research has misappropriated it, and his having no relationship whatever with the issuer is irrelevant.
What do Regulation FD and Section 16 require?
Regulation FD, adopted in 2000, attacks the problem from the issuer's side. When an issuer or a person acting on its behalf discloses material nonpublic information to securities-market professionals, or to holders who might reasonably trade on it, the issuer must make that information public. Simultaneously if the disclosure was intentional, promptly if it was not.
Promptly is defined, and the definition is a clock worth memorising: as soon as reasonably practicable, and no later than the later of 24 hours or the commencement of the next day's trading on the New York Stock Exchange, after a senior official learns of the disclosure. A non-intentional slip at 16:45 on a Friday has a deadline of 09:30 the following Monday, 64.75 hours away. The same slip at 18:05 on a Thursday is due at 18:05 on Friday, exactly 24 hours. Two arms, and which one wins depends only on the day of the week.
Regulation FD is why the quarterly earnings call has the shape it does. Before it, guidance was given in one-on-ones and on selective calls, and the analysts who got the call had a legal edge. After it, the material content moved to a publicly webcast, pre-announced event, and the surviving one-on-ones are supposed to contain no new material information. The regime imposes no duty on the recipient: an analyst who receives a selective disclosure does not violate Regulation FD, which binds only the issuer. What he risks instead is Rule 10b-5 liability as a tippee.
Two timing rules complete the picture. Section 16(a) requires directors, officers and beneficial owners of more than 10 percent to report changes in their holdings on Form 4 within two business days, a deadline shortened from the old monthly cycle by the Sarbanes-Oxley Act in 2002. Section 16(b) lets the issuer recover any profit an insider makes on a purchase and sale within any six-month window, with no need to prove that information was used.
What is the Rule 10b5-1 plan defence?
Rule 10b5-1 is the affirmative defence that makes any of this workable for insiders who need to sell. A plan adopted in good faith when the insider is unaware of material nonpublic information, specifying amount, price and date or a written formula, gives a defence to a later charge. The 2022 amendments, effective February 2023, added the conditions Worked example 2 works through. Directors and Section 16 officers get a cooling-off period of the later of 90 days after adoption or two business days after disclosure of the results for the quarter of adoption, capped at 120 days; other persons other than issuers get a flat 30 days. Good faith must hold for the life of the plan rather than only at adoption. Directors and officers certify. Overlapping plans and single-trade plans are limited, adoptions and terminations are disclosed quarterly under Item 408 of Regulation S-K, and Form 4 carries a checkbox. A modification of amount, price or timing counts as a termination and a fresh adoption, which restarts the clock. Verify at sec.gov, checked 7 September 2026.
{
"skill": "Building the insider-trading calendar for a covered company and reading its disclosed insider transactions",
"use": "Have an assistant assemble, from primary filings only, a dated timeline for one company: quarter ends, results dates, the SEBI trading-window closed periods or the United States Form 4 filings, and every disclosed insider transaction with its size and the filer's role, so you can see which trades happened in which regime state.",
"tools": ["Chat assistants with code execution - Claude, ChatGPT, Gemini", "Python: pandas for the date arithmetic and the joins", "Primary sources: the exchange filings on bseindia.com or nseindia.com for India, SEC EDGAR Form 4 for the United States"],
"prompt": "From the filings I supply, build a table with one row per disclosed insider transaction: date, filer name as filed, role, buy or sell, quantity, value, and the source document URL. Then add a second table of the company's quarter ends and results-declaration dates for the same period. Then compute, for each transaction, how many days it sits from the nearest quarter end and from the nearest results date, and flag any transaction that falls inside a SEBI trading-window closed period, defined as quarter end to 48 hours after results. State every assumption you made about time zones and about what counts as the declaration moment.",
"verify": "Recompute at least three window boundaries by hand from the results timestamps before trusting the flag column, because the 48-hour rule is a clock rather than a date and an assistant will silently truncate it to a day. Trace every transaction row to the filing it came from; a filer name misread from a PDF table is invisible downstream. Match the results-declaration timestamp to the exchange filing rather than to a news report, since the news report is usually minutes to hours late and that difference is the whole answer near a boundary. Date-check the regulation itself: the 48-hour rule dates from the 2019 amendment and the automated PAN-freeze enforcement was extended to immediate relatives in April 2025. Cite regulation, source and pull date for each. A flag with no citation is a guess.",
"diy": "You must be able to apply the two limbs of the unpublished price sensitive information test to a fact by hand, and to say who a trading window binds and who it does not, before any of this table means anything. The assistant computes dates. It cannot tell you that the analyst reading the table is not a designated person and is still caught by Regulation 4, which is the judgement the gate rewards.",
"market": "IN"
}