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May 7, 2018

Insider Trading Nirvana – A Cold War

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INTRODUCTION:

With uncountable litigations, news coverings, front page articles, documentaries, we would think that people would finally learn that insider trading is illegal. Yet it is seen, from time to time, that a bubble of scandals erupt which causes havoc in public consciousness leading to lack of faith in regulatory system and ultimately causing the economy to go down.

Some employees (“insider”) desire to reap profits, at the cost of general public, to make money in short span of time, which at times causes them to ignore the rules and regulations designed to protect the investors and keep the market fair. When such person get caught (sooner or later), they live their lives with regret and consequences.

As alleged insider trading scams hit the headlines almost every day, the time has come when Companies should start educating its “insiders” of how and when to, and not to, trade in the Company’s shares.

Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 2015, bar any insider with “unpublished price-sensitive” information of a company or listed securities from communicating or providing it to any other person, including other insiders. Such information cannot be shared unless in the case of a legal obligation or if it is disclosed in order to perform duties.

ONGOING SCENARIO:

In the present era, prohibiting insider trading and compliance of disclosure requirement shall be on the bucket list of the Company. With an approximate of 1 (One) Case of pertaining to non-compliance of insider trading regulations in 1.47 days in year 2018, it is to be decided by an Organisation whether to pay fine and tarnish its image or to ensure compliance of insider trading and rise a good citizen.

In a recent interview, SEBI chairman Mr. Ajay Tyagi said that there were six or seven blue-chip companies whose earnings were circulated on WhatsApp closer to the actual results. After Axis Bank Limited and HDFC Bank Limited, TATA Motors is the third company that SEBI has named in its probe related to the leakage of financial earnings on WhatsApp.

On January 30, 2018, Larsen and Toubro Limited along with other paid approx. Rs. 10 Lakhs for delayed compliance of regulation 13(4), 13(5) and 13(6) of SEBI (Prohibition of Insider Trading) Regulations.

on March 16, 2018, SEBI imposed penalty of Rs 10 lakh on NDTV and Rs 3 lakh each on Prannoy Roy, Radhika Roy, Vikramaditya Chandra (group CEO at that time) and Anoop Singh Juneja (compliance officer) for certain disclosure lapses under SEBI PIT Regulations, 2015.

On March 19, 2018, INEOS Styrolution Group GMBH paid over Rs. 17 Lakh to SEBI as a full and final settlement fee pertaining to non-compliance of disclosure requirement under SEBI (PIT) Regulations.

FINDING THE ROOT:

While SEBI depicting its clear intention towards zero tolerance, it has now become incumbent on the Companies to make their employees aware about insider trading norms and its catastrophic consequences on violations.

WHY SUCH NON COMPLIANCES OCCUR???

THE ONE AND THE ONLY REASON IN MOST CASES IS

NON AWARENESS

Many insiders unwittingly, unconsciously and inadvertently make a step that start a journey full of allegations, litigations, fines and penalties.

Generally, the Directors and Employees of a Company are not aware of technicalities and integrities relating to insider laws including concepts like, vicinity of insider laws, UPSI, materiality, closure and opening of trading window, trading plan, Pre-Clearance, restricted list of securities, contra trade, basis of forming code of conduct, trigger events for making disclosures etc., therefore it is advisable for them to impart education among its employees so that they can immaculately deal with the mechanics of insider laws.

WE CAN ASSIST YOU:

We Corporate Professionals, has initiated conducting awareness sessions for Corporates, analysts, consultants, auditors and every other person having fiduciary or contractual relation with the listed company. The sessions will aim to disseminate each and every aspect surrounding INSIDER LAWS covering from minute details to major mountains.

GET IN TOUCH:

For further clarifications or information, you can reach us @

Name : Ms. Mohini Varshneya
Address : D-28, South Ex., Part-I, New Delhi-110049
Email : mohini@indiacp.com
Phone : +91 11 40622231 / +91 9971673332

A Company should conquer the back holes from within, it should aspire to inspire its employees before it expires from the market.

AUTHORED BY

Ms. Mohini Varshenya

Partner & Head-ESOP Services

FCS