New SEBI norms to break through inside price-related information

Mutual fund companies and intermediaries will now have to be more careful when they deal with undisclosed and sensitive information about their product pricing.

Capital market regulator, Securities & Exchange Board of India (SEBI) has introduced a set of insider-trading regulations for this. The company can be penalized if they insist on pricing without any ‘legitimate reason’.

SEBI’s latest amendment in regulations has broadened the scope of its insider-trading standards. They have also mandated the need for reporting trades and getting clearance before buying or selling the company’s shares. This applies to senior members of material subsidiaries as well as distributors of listed companies.

More on UPSI (Unpublished Price Sensitive Information)

SEBI amendments make it clear that if the trader possesses a UPSI, his trades will be assumed to be driven by the UPSI.

Firms will have to furnish definitions for each and every ‘legitimate purpose and reason’. It also calls for whistle-blower facilities to report leaks of UPSI data along with inquiry panels to investigate the source of such discrepancies.

All these steps seek to monitor the internal and external flow of UPSI and encourage employees to notify the company if they suspect such leaks.

Legitimate purpose and reasons include:

Disclosing UPSI in the regular course of business by an insider – with associates, collaborators, financiers, clients, patrons, suppliers, merchant bankers, legal counsellors, auditors, accountants, insolvency professionals or other advisers – as long as such sharing has not been undertaken to evade these norms.

These regulations came into effect this month and mandate companies to keep records of PAN and mobile numbers (WhatsApp) as well as details of their immediate family members and close friends circle. WhatsApp leaks were particularly common, which they intend to change.

All these rules, as well as personal info of directors and people involved, will help SEBI tremendously to connect with companies as well as those who trade while preventing UPSI leakages.