New Sebi norms tighten noose on insider traders

MUMBAI: Capital markets regulator Sebi on Wednesday tightened insider-trading norms by widening the scope of the category of insider, bringing in all persons, including immediate relatives, under its ambit.
ens and protects investor interests, it has also drawn criticism with legal experts saying the harsh provisions could be open to interpretation.
Sebi finalised the new regulation that will replace the Sebi (Prohibition of Insider Trading) Regulations of 1992, after deliberating on recommendations made by the Justice N K Sodhi Committee. The panel had been constituted to review the existing insider trading regulatory regime.
Sebi said the definition of insider has been made wider by including persons connected on the basis of being in any contractual, fiduciary or employment
Sebi chairman sitive information. “Now, immediate relatives will be presumed to be connected persons, with a right to rebut the presumption. In the 1992 regulations, definition of connected person was largely position based,” Sebi said.
The move to tighten the norms follows Sebi’s publicly stated concerns on instances of insider trading at big corporates. Sebi chairman UK Sinha had recently said: “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.”
Insider trading typically involves dealing in securities by persons with prior access to unpublished price-sensitive information (UPSI). Former McKinsey head Rajat Gupta, for instance, was found to have violated similar provisions in the US and convicted.
However, certain outdated provisions of the existing norms have also been misused by offenders to escape regulatory action.
“They have defined the new regulation in such a manner that it may be misused,” said Rohan Shah, managing partner at Economic Laws Practice. “While Sebi needs to be lauded for ensuring a transparent capital markets structure, this widening of the scope of insider may cause problems.”
“This can be described as a situation where you are presumed guilty unless proven innocent,” says Harish HV, partner at Grant Thornton. “Already firms have been finding provisions of Companies Act difficult to meet. The new insider tradin
NAME-RAJ GAURAV
            PGDM 3 SEM