Insider Trading in Indian Market: Legal and Regulatory Framework
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Likewise introduction of revised Cl. For the overall ease to Corporates, instead of number of days, SEBI could have specified a particular date from which insider trading in india 2016 regulations would come in force. The new regulations shall put in place a framework for prohibition of insider trading in securities and to strengthen legal framework thereof. However, it is not clear as to whether such notes has got any binding impact or otherwise, wherever applicable.
Further, SEBI has provided 10 categories of connected persons who shall be deemed to be connected persons unless contrary is established. With the new definition of connected persons, it is clear for corporates that a connected person means anyone who has a connection with company that is expected to put him in possession of UPSI.
As a result, the Corporates shall have to have up-to-date list of all such persons presumed to be connected. However, Corporates shall have to gear-up and ensure that such list is prepared and up-dated, in order to avoid unwarranted situations. With this, all immediate relatives need not be included under the definition unless any of the other conditions are insider trading in india 2016.
While elaborating on " insider"SEBI brought under net a connected person or a person in possession of or having access to UPSIregardless of its means. This is quite comprehensive to cover all possibilities of dealings in securities. The Regulations put restrictions on communication and trading by insiders.
However, it provides exception where such communication is in furtherance of legitimate purposes, performance of duties or discharge of legal obligations.
This necessitates all insiders of corporates not to disclose any information to anybody including, even, other insiders which may result into disclosure of UPSI under the new code for insiders. There is a need to imbibe and strict implementation of the need-to-know principle, among all Insiders within the Corporate World. During such transactions, the onus of establishing, non-possession of UPSIshall be on such connected persons. New Regulations allow an insider to formulate trading plan i.
A clarification through note allows transaction though person is in possession of UPSI as he had pre-decided the transactions even before the UPSI came into being. This adds to confusion for Corporates insider trading in india 2016 defeats the purpose of having insider trading in india 2016 plan in place in advance.
This may discourage insiders, who might have any strategy of going ahead with the concept of Trading Plan. It is not made clear anywhere whether pre-clearance is necessary or not — for transaction implementation which are incorporated in the trading plan. This puts restriction on corporates to pre-decide Board meeting dates, well-in-advance and disclose the same to all insiders; so as to enable them to have proper trading plan in terms of insider trading in india 2016 restrictions.
In spite of such advance information for insiders, it is practically not possible for anybody to pre-decide the dates of trading and follow the above restriction, as well. Compliance Officer shall review trading plan and assess whether plan would have any potential for violation of these regulations, approve the same, and monitor its implementation.
The Regulations put restriction that insider trading in india 2016 trading plan need to be implemented mandatorily and shall be irrevocable. Further, no deviation is allowed with execution of any trade in securities outside the scope of trading plan as it would have impact on market pulse, as well. Approved trading plan, need to be notified to stock exchanges on which company securities are listed. Further, every such person shall make similar disclosures within 7 days of assuming such position.
Under continual disclosuresevery promoter, employee and director of every company shall disclose to the company the number of such insider trading in india 2016 acquired or disposed of within 2 trading days of such transaction if the value of the securities traded, whether in one transaction or a series of transactions over any calendar quarter, aggregates to a traded value in excess of Rs.
However, in the initial disclosure provisions no such term has been used. The company, in turn, shall notify the particulars of such trading to the stock exchange on which securities are listed within 2 trading days of receipt of the disclosure or from becoming aware of such information.
The Company needs to make such disclosure of incremental transactions when transactions effected after prior disclosure cross threshold of Rs. Regulations provide freedom to companies to decide on disclosures by other connected persons i.
Prompt public disclosure of UPSI that would impact price discovery no sooner than credible. Designation of a senior officer as a chief investor relations officer to deal with dissemination. Prompt dissemination of information that gets disclosed selectively, insider trading in india 2016 or otherwise to make it generally available. Appropriate and fair response to queries on news reports and requests for verification of market rumours by regulatory authorities. Ensuring that information shared with analysts and insider trading in india 2016 personnel is not UPSI.
Developing best practices to make transcripts or records of proceedings of insider trading in india 2016 with analysts and other investor relations conferences on the official website to ensure official confirmation and documentation of disclosures made.
Handling of all unpublished price sensitive information on a need-to-know basis. Minimum Standards for Code of Conduct under new regulations to Regulate, Monitor and Report Trading by Insiders includes almost all heads of model code under old Regulations viz.
The periodic reporting on insider code compliance by Compliance Officer to board of directors and in particular, to Chairman of the Audit Committee, if any, or to Chairman of board of directors has also been specified. Every other person Include professional firms such as auditors, accountancy firms, law firms, analysts, consultants etc. Every entity formulating code insider trading in india 2016 also designate a senior officer as the compliance officer with the responsibility to administer the code of conduct and monitor compliance with these regulations.
After going through all the provisions of the new regulations, anyone may think that to avoid all such complexities, why not have a simple insider trading code? Such code shall have provisions of one or two pages, having thrust on the following:. In the coming years of liberalization and governance compliance, there is no harm in introducing such simple code for prohibition of insider trading.
Very well compiled and written. SEBI is making the procedures cumbersome, by mandating several policies to putforth by a corporate. This will in a way lead to a gas bag, which is certain to burst! Insolvency Law Committee suggests streamlining Sec. Bans Noticees from accessing securities market for fraudulent preferential allotment, manipulative trades. March 04, Rate this story: Prashant Vaishampayan Practising CS. It includes, Off-market inter-se transfer between promoters who were in possession of the same UPSI without being in breach of regulation 3 and both parties had made a conscious and informed trade decision.
Transactions in the case of non-individual insiders without disclosure of any UPSI at the time of the decision to trade; and after ensuring that these regulations are not violated. However, there are restrictions even for trading plan prescribed under the insider trading in india 2016 i.
Commencement of trading after 6 months from the public disclosure of the plan, which allows UPSI to become generally available information. Code of Fair Disclosure and Conduct: Uniform and universal dissemination to avoid selective disclosure. Separate Code by other entities: Why not have a simple code? Such code shall have provisions of one or two pages, having thrust on the following: No director, employee and connected person with a particular Corporate, is allowed to deal anyway in its securities, on and from they are associated with the organisation.
Employees can buy the securities only against exercise of ESOPs. They shall be allowed to hold securities, which they were holding on joining or getting associated with the organization. They shall provide only an initial disclosure in this regard.
Only promoters are allowed to deal in securities subject to reasonable restrictions and clear disclosures from time to time, under these regulations and other applicable regulations viz. Such restrictions on dealing with securities shall continue to prevail till insider trading in india 2016 of one year from their parting from the organization.