SEBI tightens the rule for insider trading in markets

Market regulator, the Securities and Exchange Board of India (SEBI) has tightened the noose around the Insider Traders and has announced measures to improve the integrity of the capital markets by enlarging the definition of those who could qualify to be charged under the law for insider trading, making it tougher for anyone with access to unpublished price sensitive information to make illegitimate gains. The new rules announced by SEBI based on a report by Justice N K Sodhi, a retired chief justice of Karnataka and Kerala high court, that was finalized in December 2013 and was put up for public comments, make it tougher for people in addition to promoters, directors and some top officials, having price-sensitive information to trade in the market for quick gains. Sebi’s new rules on insider trading now also include all people who are in possession of information which are generally not available to public and which may impact the price of a stock, called unpublished price sensitive information (UPSI). Sebi further said that insiders having access of UPSI round the year can have a pre-scheduled trading plans that should be disclosed to stock exchanges and should be adhered to strictly. Immediate relatives of people with access to UPSI will be presumed to be connected persons, though as a safeguard they have been given a right to rebut the presumption. However SEBI said that the requirement of communication of UPSI in the case of legitimate business transaction is recognised in law and a carve-out with safeguards has been provided. The market regulator has also made the delisting rules stricter and said that for a delisting to be considered successful, shareholding of the acquirer together with shares tendered by public shareholders must reach at least 90 percent of the total share capital of the company. The second condition to be fulfilled is that at least 25 per cent of the public shareholders tender their shares in a reverse book building process. SEBI has reduced the timeline for completing the process of delisting to 76 working days from 117 working days. Sebi’s board has also given its nod to the proposal to review the policy that can restrict a company, its promoters or directors who are categorized as wilful defaulters from raising capital. The policy may be accepted after going through a public consultation process.