Insider trading has been a permanent bane for Indian equity investors. Some of it is perfectly legal of course. However, most of the time minority investors are clueless concerning the wheeling and dealing that goes on behind the scenes. Now there seems to be a glimmer of hope for minority investors from the unscrupulous designs of shady promoters who use price sensitive information to manipulate stock prices.
The market regulator SEBI has come out with new guidelines to curb insider trading. The norms haven't been notified but as per the press release the broad points are as follows:
Clarity has been provided regarding the key issue of defining exactly who is an insider.
The onus of proving guilt has been placed with SEBI.
The onus of proving innocence has been left with the accused.
A definition of what constitutes 'price sensitive information' has also been provided.
They also specify the conditions under which SEBI can launch an investigation.
Additionally, the regulations have been aligned with SEBI's listing guidelines. Thus, any company which will list on the exchanges will now be automatically covered under the new norms.
The process of appealing an order of SEBI has also been provided.
These rules certainly provide SEBI with much needed teeth to clamp down on illegal trading activities. However, it will be up to SEBI to not go overboard with indiscriminate investigations. If the regulator can crack down on such offenses without burdening corporates with bureaucratic procedures then the regulator can give itself a pat on the back.
However, it must be kept in mind that this is just the beginning. The strict enforcement of these rules and ensuring compliance from corporates must follow. Only then will minority investors be able to breathe a little easier we believe.