Sebi may announce new insider trading norms by next week

In its efforts to make listed firms more responsible towards investors, Sebi may announce new insider trading norms as early as next week and also revamp the listing as well as delisting regulations.

The changes are being made after taking into account suggestions made by the industry and other stakeholders— including market entities and investors —and are aimed at protecting the interest of minority investors without making the regulatory compliance cumbersome for the companies.

These new norms — to check insider trading menace, to enforce better compliance to continuous listing regulations and to revamp delisting norms for a faster and easier process for those desiring to delist from the stock market — will be put up for approval of Sebi's board in its next meeting.

Sources said that the final sets of regulations in all these areas may be in place this month itself, beginning as early as next week.

The proposed tightening of norms assumes significance in the wake of Sebi coming across cases of insider trading at not just small companies, but at big corporates as well.

Besides, another set of new regulations would help Sebi take prompter and stricter action against the entities found to be violating listing norms.

‘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,’ Sebi Chairman U K Sinha recently said. 

The new insider trading norms, which would replace nearly two-decade-old rules in this area, would be substantially based on recommendations of an expert committee constituted by the Securities and Exchange Board of India (Sebi) and the suggestions made thereafter to this panel's draft proposals.

The panel, chaired by former Chief Justice of Karnataka and Kerala High Courts, K Sodhi, was set up to review the Sebi (Prohibition of Insider Trading) Regulations, 1992.

The new listing regulations would focus on dealing with possible violations of corporate governance norms by listed firms, including those about inadequate or faulty disclosures, related party transactions, anomalies in board constitutions.

Besides Sodhi panel, Sebi's International Advisory Board (IAB) has also suggested significant changes in insider trading norms to bring them at par with global best practices.

Insider trading — dealing in securities with prior access to unpublished price-sensitive information —has been attracting regulatory attention worldwide. However, certain outdated provisions of existing norms have been misused by the offenders to escape regulatory action.

The new norms can also put in place specific guidelines for holding of AGMs, about which Sebi Chairman recently said that there was a need for better governance practices at listed companies and shareholders' meetings should not be like ‘chai and samosa parties’. 

Sebi is also in favour of onus being put more on the promoters or the top executives, rather than the companies as a whole, when it comes to penalties.