SEBI changes guidelines to stop insider trading
05 Dec 2008
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SEBI has tightened insider trading norms to plug several loopholes, which had existed in the insider trading regulations currently in force.
The market regulator has also introduced a new clause that bars people under the definition of ''insiders'' from taking positions in derivative transactions in the shares of a company at any time.
Moreover, SEBI has now made it compulsory for designated insiders to hold their investments through initial public offers (IPOs), for a minimum period of 30 days.
These changes have broadened the definition of an insider and will stem the insider trading that is prevalent in the stock markets.
| Key changes | Old regulation | New regulation |
| Definition of deemed insider | A deemed insider is someone who was or is connected with the company and had access to unpublished price sensitive index information. | A deemed insider can be anyone who has access to unpublished price sensitive information. The person need not have a connection to the company to be held liable for insider training. |
| Compliance | The model code as laid down by SEBI has to be followed as much as possible. | The companies have to apply this model code without diluting it in any manner. |
| Period of holdings | Directors, officers and designated employees who buy or sell shares can't carry out a reverse transaction within one month. | Directors, officers and designated employees who buy or sell shares can't carry out a reverse transaction within six months. |
| Penalties | Unjust gains made by an insider were to be surrendered to the company. | SEBI will proceed against those violating the rules on the basis of its statute book. |
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