With the discovery of massive frauds in the Indian and International capital markets, regulators and legislatures have increasingly turned towards making corporate governance standards mandatory and have attached penalties to violation of these corporate governance guidelines. This paper questions the necessity for associating corporate governance in the insider trading context with penal provisions in India. It makes suggestions for the removal of these penalties and instead let the markets decide whether to penalise companies which do not have these process oriented safeguards in place. The paper also recommends introduction of certain substantive and procedural regulations/standards for reduction of the incidence of insider trading in companies.