S.E.B.I. PANEL FOR TIGHT LEASH ON FIRMS TO CHECK INSIDER TRADING. S.E.B.I. appointed a committee reviewing insider trading rules is likely to suggest an end to the corporate practice of disclosing price sensitive information to analysts. It may also prohibit sale or purchase of a company’s shares by ‘insiders’ before major events such as results, merger and acquisition announcements, among others. Insider trading involves benefiting illegally from privileged market-sensitive information that’s not in the public domain. Justice NK Sodhi-headed committee reviewing the regulations on insider trading is expected to submit its report before Diwali (November 3), it is learnt. The committee will make stock exchange disclosures mandatory for all listed companies before they reveal price sensitive information to analysts. Indian listed companies routinely and selectively disclose their future plans and other price sensitive information to stock analysts and big research houses to get favourable recommendations such as ‘buy’ and ‘hold’. “We want all disclosures to be made first to stock exchanges. The disclosure of price sensitive information selectively to analysts should stop. That’s our view,” said a committee member. Speaking at the 25th anniversary celebration of Sebi recently, prime minister Manmohan Singh, finance minister P Chidambaram and market regulator UK Sinha stressed the importance of weeding out insider trading. The prime minister asked the market regulator to crack down on the “hard-to-define but extremely pernicious disease of insider trading.” The committee met under Sodhi along with the presiding officer of the securities appellate tribunal last week. Another meeting will be held soon. It is learnt that the committee will also suggest speedy completion of insider trading cases. “Once a case is established, we want a fast decision,” said the person. Insider trading cases now drag on and on, sometimes for more than six years. On sale and purchase of shares by ‘insiders’ before a price sensitive information is announced, it is likely that the committee will prescribe a time-frame within which insiders are allowed to sell or buy shares. Though the current plan is not to allow sale or purchase within a prescribed set of days before the price sensitive information is disclosed, there is also a view that such deals should also be not allowed immediately after the announcement. This is because there is a feeling that not acting (on sale and purchase) can also be considered ‘insider trading’. For instance, an insider who knows the company will announce good earnings can wait till the announcement to sell his or her shares. “So, we need to discuss if there should also be a ban on sale and purchase immediately (say for a week) after price sensitive information is announced,” said the committee member.
Posted on: Thu, 20 Jun 2013 06:27:51 +0000
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