The Securities and Exchange Board of India (Sebi) will soon finalise rules pertaining to insider trading as also improvise delisting norms. This comes close on the heels of the regulator introducing guidelines on investment trusts for real estate and infrastructure sectors, and improving the framework of equity capital markets.
The new rules may be announced at Sebi’s board meeting on Nov 19 in Mumbai, people familiar with the matter told FE.
In December last year, Sebi chairman UK Sinha had suggested an overhaul in the governance of insider trading by recommending a wider definition of parties considered as ‘insiders’ and putting the onus on insiders to prove they have not breached the law. The recommendations were a part of the draft report formulated by a 15-member high-level committee constituted by Sebi to replace the 22-year-old rule in this area. The committee was headed by NK Sodhi, former Chief Justice of Karnataka and Kerala High Courts as well as former presiding officer of the Securities Appellate Tribunal (SAT).
The panel had emphasised the definition of ‘insider’ and recommended that ‘connected persons’, or any individual in possession of unpublished price-sensitive information (UPSI), be considered an ‘insider’. The panel had described a ‘connected person’ as an individual in possession of UPSI and associated with the concerned trade at the time or during the six months prior to the occurrence of the concerned trade, in any capacity. The proposed revision in norms assumes significance in the wake of Sebi receiving complaints of insider trading in not just small companies, but also big corporates.
“We are revising our prevention of insider-trading regulations because we have discovered cases… unfortunately, the cases are not just from small companies, but also from big ones,” Sinha was quoted as saying at a recent capital market conference.
Sebi had also recommended bringing public servants, including Sebi officials, under the purview of insider-trading rules. The rationale was that government officials have access to insider or price-sensitive information. Other recommendations included increasing trades disclosure threshold to R10 lakh or more in a quarter from R5 lakh, and also outlawing “communication of UPSI by any insider except where such communication is legitimately necessary for performance of duties or discharge of legal obligations”.