U.K. Sinha in Calcutta on Tuesday. Picture by Kishor Roy Chowdhury
Calcutta, March 26: Tighter rules against insider trading are expected to be in place by the end of this year, according to the Securities and Exchange Board of India.
Insider trading is an unlawful activity of buying and selling securities of a firm by those possessing price-sensitive information unavailable in the public domain to make profit.
Sebi chairman Upendra Kumar Sinha today said insider trading was an “offence” and against the interest of public shareholders.
The market regulator is also planning to bring in stricter regulations on share buyback.
“Insider trading is an offence on which there is a huge public debate both inside and outside India. We have taken action in a number of cases but our current regulations are very poor,” Sinha today said on the sidelines of an interactive session organised by the Confederation of Indian Industry here today.
The regulator has set up an expert committee, headed by former presiding officer of the Securities Appellate Tribunal and retired Chief Justice of the Karnataka high court N.K. Sodhi, to overhaul the two-decade old regulations along the lines of similar policies followed by other countries.
“We have set up a committee, which is expected to start work soon and hopefully during this year we will come up with a revised insider trading regulation,” Sinha said.
Share buybacks may be connected to insider trading as well. If a company’s management believes that the stock is trading below its intrinsic value, it may consider buying back shares from the public.
However, unlawful activities by insiders possessing sensitive information could lead to a spurt in stock prices resulting in a profit for them.
“We have seen that some companies are trying to use the buyback regulations not to reward the investors but to manipulate the share prices. A discussion paper has been in the public domain and new regulations are expected soon,” Sinha said.