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Informist, Monday, Jul 29, 2024

 

MUMBAI – The Securities and Exchange Board of India today proposed changes in its insider trading norms that will expand the scope of the definition of connected person. The proposals were made in a public consultation paper released today. Market participants and stakeholders can give comments on the proposals by Aug 18.

 

The market regulator said that it has observed certain categories of persons who are currently not covered in the scope of the definition of connected persons "may also be in a position to have access to UPSI (unpublished price sensitive information) from 'connected persons' to a company, by virtue of their close relationship with such 'connected persons'". These persons can potentially indulge in insider trading, SEBI said.

 

The proposed expanded definition of connected person covers a firm or its partner or employee. It will also include "any person on whose advice, directions, or instructions a 'connected person' is accustomed to act." Directors or managers of a company who are accustomed to act on advice and instructions of an existing connected person will also be covered in the definition.

 

Further, persons sharing a house with a 'connected person' will also get covered in the expanded definition. It will also include persons having a material financial relationship with a connected person, which could be due to reasons such as employment, financial dependency, or frequent financial transactions, the SEBI paper said.

 

Currently, insider trading norms also apply to immediate relatives of connected persons. The SEBI paper has proposed applying it to all relatives as defined under the Income Tax Act, 1961.

 

If SEBI's proposals see the light of day, then the expanded list of connected persons will have to, like connected persons today, prove that they were not in possession of unpublished price-sensitive information if SEBI casts a charge.

 

Under SEBI's insider trading regulations, an insider is defined as a connected person, or someone who is in possession of or having access to unpublished price-sensitive information. The current definition does provide enough powers to the market regulator to bring under the ambit of insiders a wide array of persons. The proposed changes are seen as helping codify it further.  End

 

Reported by Rajesh Gajra

Edited by Saji George Titus

 

 

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