Mumbai: Sebi will soon put in place a new set of norms to deal with insider trading menace, which would clearly demarcate 'innocent mistakes' from serious violations committed by top corporate executives and other connected entities while trading in shares of listed companies.
The new norms, being finalised on the basis of an expert panel's suggestions and public comments on this issue, would strengthen the system for controlling and preventing insider trading and also provide greater clarity to the company executives, promoters and others on their trading activities, Sebi Chairman U K Sinha said.
This new set of regulations would replace nearly two-decade old insider trading norms currently in place and public comments have been invited till December 31 on draft norms suggested by an expert committee set up by Sebi.
"The aim is that all points that lacked some clarity, would be made very clear now and by providing this clarity, innocent mistakes can be avoided," Sinha said.
The new norms are expected to put in place stricter penalties for those found to be indulging in insider trading activities, while it has also been proposed that public servants, regulators and persons holding statutory positions should be brought under its purview if they are handling share price-sensitive information about listed companies.
"But another important thing that I want to communicate is that these norms also provide a clarity," Sinha said in an interview here.
"We should not create a situation where anybody is afraid of trading and a clarity is required for that. These norms would provide very clear guidelines on what is doable and what is not illegal, so that innocent mistakes and genuine transactions do not get affected because of insider trading rules," he said.
The Sebi chief further said that the expert panel has suggested putting in place a new concept, which is already there is many advanced markets and provides for having a pre-decided or pre-scheduled trading calendar.
"The thought process is that, for example there is a CEO or CFO of a company, he may have some exclusive information around the year, which other investors may not have. Right now we have a closing window for trading by such persons. But even when there is no such window within a few days of quarterly or annual results, technically that person can trade.
"So this recommendation says that this man is in possession of UPSI all through the year, but how can he be stopped from trading ever.
"Therefore, it has been suggested that if the person is well-meaning, let him give a pre-scheduled trading pattern and disclose the same and let him trade. These things have been provided to make it easy and practical for genuine transactions," he said.
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