Monday 30 December 2013

SEBI to issue new set of norms soon to deal with insider trading menace

In order to deal with insider trading menace, the Securities and Exchange Board of India (SEBI) will soon put in place a new set of norms, which would clearly demarcate mistakes from serious violations committed by top corporate executives and other connected entities while trading in shares of listed companies. New regulations would replace nearly two-decade old insider trading norms currently in operation. SEBI chairman U K Sinha stated that new norms will be finalized on the basis of an expert panel's suggestions and public comments on this issue, which would strengthen the system for controlling and preventing insider trading, besides providing more clarity to the company executives, promoters and others on their trading activities.

Further, new guidelines for insider trading are likely to put in place stricter penalties for those found to be indulging in insider trading activities. While, the draft has already proposed that public servants, regulators and persons holding statutory positions should be brought under its purview if they are handling share price-sensitive information about listed companies. Moreover, expert panel has also suggested to put in place a new concept for providing a pre-decided or pre-scheduled trading calendar, which is already functioning in many advanced markets.

U K Sinha further added that it is difficult to stop trading by company’s management such as CEO or CFO, who have some exclusive information around the year. Presently, SEBI has a closing window for trading by such persons. Therefore, in order to check insider trading, SEBI has also planned to introduce a pre-scheduled trading pattern for such persons. Further, proposed regulations would put in place a very clear definition for connected persons and thereby prohibit top corporate executives from trading having access to unpublished price sensitive information (UPSI). 

No comments:

Post a Comment