India toughens insider trading rules

December 15, 2013 Leave a comment

India toughens insider trading rules

Wed, Dec 11 2013

By Himank Sharma

MUMBAI (Reuters) – India’s financial market regulator unveiled new proposals on Wednesday, broadening the scope of who can be held liable for insider trading violations, as it steps up its fight against securities fraud. The Securities and Exchange Board of India (SEBI) plans to include company employees, directors and their immediate relatives and other stakeholders such as founders, handling market sensitive information under its purview.Under current rules only senior executives are liable for trading violations.

SEBI has long sought greater powers to investigate securities fraud, which many analysts say is undermining confidence in the stock market, particularly among retail investors.

In May India’s Prime Minister Manmohan Singh urged SEBI to root out the “disease of insider trading” from stock markets.

Officials with access to sensitive information will also be required to submit planned trades in company shares ahead of time to resolve any potential conflict of interest.

The new proposals also mandate that every listed company and market intermediary formulate a code of conduct to regulate, monitor and report trading in securities by its employees or connected persons.

Trades by stakeholders, employees, directors and their immediate relatives would need to be disclosed internally to the company.

J.N. Gupta, a former SEBI executive director who now runs proxy advisory firm Stakeholders Empowerment Services, said the new proposals could be effective in curbing insider trading.

“There was always a problem in defining an ‘insider’, which was a loophole people used exploit to go scot-free because they would not come into the narrow definition of insider,” he said.

SEBI’s previous attempts at tackling insider trading have often ended up in long-drawn litigation or have been settled for relatively small fines without yielding any criminal conviction.

Earlier this year India’s government extended SEBI’s powers, allowing it to monitor investors’ records of phone calls, but not the calls themselves, and conduct searches at companies suspected of wrongdoing.

Last month SEBI said it would empower the country’s exchanges to enforce rules on corporate disclosures at listed companies.

“As usual the challenge will remain in enforcing those regulations,” said Gupta at Stakeholders Empowerment.

“In that regard SEBI’s new powers to track telephone records will help up to a certain extent.”

Filed under Macro Trends

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Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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