To check insider trading menace, the Securities and Exchange Board of India on Monday asked listed companies to disclose details of securities held by promoters, directors, key management personnel and their relatives and other connected persons, before and after assuming such roles.
Besides, the companies will have to formulate and disclose a code of conduct and a code of fair disclosure, comprising the practices and procedures followed for fair disclosure and handling of 'unpublished price sensitive information (UPSI).
Listed companies have also been asked to deal only with those market intermediaries and other entities, with regard to handling the UPSI, who have formulated a similar code of conduct in this regard.
The disclosure about the securities held by promoters, directors, key management personnel and their relatives and connected persons, as also the transactions conducted by them, would need to be made in a prescribed format, while the Codes of Conduct and Fair Disclosure would have to be published on the companies' websites also.
Sebi has also asked the stock exchanges to put in place adequate systems and issue the necessary guidelines for implementing these decisions.
The move will help in checking illicit transactions in shares of listed firms by management personnel and 'connected persons'.
The Securities and Exchange Board of India (Sebi) had notified the new insider trading regulation in January. The new norm would come into force from May 15.
Prescribing the format for submission of such reports, Sebi said companies would be required to disclose details including name, address, PAN of these persons, types and number of securities (shares, warrants, convertible debentures) held by them, pre and post shareholding in the firm, mode of acquisition and value of the securities among others.
A 'connected person' is one who has a connection with the company that is expected to put him in possession of UPSI. In case of 'connected parties', companies are required to inform about the connection of the person with the firm.
Under the new regulation, greater clarity on concepts and definitions has been put in place along with a stronger legal and enforcement framework for prevention of insider trading.
The tightening of norms assumes significance in the wake of Sebi coming across cases of insider trading at not just small companies, but at big corporates as well.
