The Securities and Exchange Board of India (SEBI) has approved listing regulations, stricter norms to deal with insider trading menace and amendments to delisting regulations. By replacing a two-decade old law, the capital markets watchdog has approved these norms in order to bring in stricter regulations and simpler compliance requirements and boost investor confidence in Indian capital markets.
The new rules broaden the scope of who can be held liable for insider trading violations and require company executives to make more transparent disclosures of their trading activities.
It has widened the definition of ‘insider’ by including persons connected via contractual relation, fiduciary relations, immediate relatives presumed to be ‘connected persons’ or anyone with access to unpublished price sensitive information (UPSI) or onus of proving non-possession of UPSI on connected person.
Anyone who is or has, during the 6 months prior to the concerned act, been associated with a company, directly or indirectly, in any capacity including by reason of frequent communication with its officers or being in any contractual, fiduciary or employment relationship that allows such person access to unpublished price sensitive information is a connected person.
The insider trade norms say UPSI disclosure in public domain is now mandatory before trade. Moreover, advance disclosure of UPSI is a must—minimum two days prior to trade. However, it also states that insiders can formulate pre- scheduled trading plans, which have to be disclosed to stock exchanges and have to be followed.
The SEBI board has also streamlined delisting norms by saying that a delisting is successful if 25 percent of public stake is tendered and if the acquirer gets 90 percent of the share capital. If delisting fails, the acquirer must pay interest at 10% per annum.