In a discussion paper floated on its website, Sebi said, "In order to have an efficient market, it is essential that all relevant information which has an impact on the price of the shares of a company is promptly disseminated to the market. The listing agreement with the stock exchanges (SEs) and Sebi Insider Trading Regulations require the company to make continuous and prompt dissemination of the price sensitive information to the market, stock exchanges and other print and electronic media.
The directors and officers of the company, being insiders, have access to the unpublished price-sensitive information. The dealing in shares by major shareholders itself is price sensitive information and therefore, Regulation 13 of Sebi (Prohibition of Insider Trading) Regulations, 1992 requires that these entities shall disseminate information about their dealing in the shares of the company on crossing certain threshold limit prescribed in the regulations to the company. The SEs in turn disseminates the same to the market through electronic notices to its members and also displays the same on its website."
Under the present Sebi Insider Trading Regulations, the shareholder, director, or officer of a listed company is required to disclose to the company information regarding the shareholding within four working days of receipt of intimation of allotment of shares or the acquisition or sale of shares or of becoming the director or officer of the said company, as the case may be.
The company in turn is required to disclose this to the SEs, on which the company is listed, within five days. Thus, on occasion, a total of nine days may pass before price sensitive information is disseminated to the public. The rationale for the said disclosure is diluted over the nine days period provided for it, Sebi said.