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Insider trading rules on way

Mumbai, Nov. 28: The Securities and Exchange Board of India (Sebi) is all set to fine-tune its norms relating to insider trading. The new draft rules are likely to be issued in the next 10 days.

Sebi chairman U.K. Sinha said a 14-member panel, which had been appointed in March to review the existing rules, would submit its recommendations in the next few days. The market regulator will come out with detailed norms after obtaining feedback from the public.

The new insider trading regulations will replace a nearly two-decade old set of norms.

The expert committee set up in March was headed by N.K. Sodhi, retired Chief Justice of the Karnataka high court and former presiding officer of the Securities Appellate Tribunal. The members comprised Sebi officials, executives from companies, legal experts and journalists.

While setting up this committee, Sebi had said global regulators were now focusing on the need to contain the rising menace of insider trading. The new norms will take into account the practices followed in the other parts of the world.

Insider trading is the illegal practice of trading (buying or selling) in a listed stock using price sensitive information which are not available to others.

The Sebi chief further disclosed that the regulator would finalise rules with regard to real estate investment trusts (REITs) at its board meeting next month. Sebi had put out a consultative paper on the introduction of REITs in the country last month.

REITs are similar to mutual funds in that they collect money from investors and put them into real estate assets that may comprise commercial projects such as office buildings or malls apart from housing complexes.

Investors in REITs earn on account of both dividend (from the rent collected) and wealth accumulation (capital appreciation of the underlying property). The rent collected is subsequently paid to investors as dividend.

The market regulator has been in favour of providing tax incentives to investors putting their money in REITs — a sure way to evoke interest in the new instrument. It has taken up the matter with the government and the tax authorities.

Sebi has proposed that while the REITs could raise funds from any investors, resident or foreign, at least initially, till the market develops, the units floated by the REITs will be offered only to high net worth individuals (HNIs) or institutions. For this purpose, the minimum subscription size of these units has been kept at Rs 2 lakh and the unit size at Rs 1 lakh.

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