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Stricter rules ahead for insider trading

To protect the interest of investors, the Securities and Exchange Board of India is looking to tighten regulations against insider trading.
Print Edition: January 2014
Stricter rules ahead for insider trading

To protect the interest of investors, the Securities and Exchange Board of India is looking to tighten regulations against insider trading.

A committee set up by the capital market regulator has proposed to widen the definition of insiders by including public servant, employees and their immediate relatives who are in possession of price-sensitive information.

Under current rules only senior executives are liable for trading violations.

Insider trading refers to the act of trading in companies' shares by people who are privy to classified information.

The panel has suggested that trades by promoters, employees, directors and their immediate relatives would need to be disclosed internally to the company. The panel also recommended that trades within a calendar quarter of a value beyond Rs 10 lakh or such other amount as Sebi may specify, would be required to be disclosed to the stock exchanges.

"Every entity that has issued securities which are listed on a stock exchange or which are intended to be listed would be required to formulate and publish a code of fair disclosure governing disclosure of events and circumstances that would impact price discovery of its securities," said the market regulator in a press release.

The guidelines also proposes that auditors, law firms, accountancy firms, analysts, consultants, etc, who are privy to sensitive information in the course of business operations may also formulate a code of conduct. Existence of such a code would show the seriousness with which the organisation treats compliance requirements.

The proposals by the panel make it mandatory for every listed company and market intermediary to formulate a code of conduct to regulate, monitor and report trading in securities by its employees and other connected persons. Companies would also be required to disclose trading and holdings of its securities by third-party connected persons who are not employees.

Sebi has invited public comments on the panel's recommendations, which is posted on the Sebi website, before 31 December 2013.

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