that any person in possession of UPSI would be considered an insider.
The committee has, therefore, widened the definition of insider to cover larger number of individuals who have access to insider information and thereby can illegitimately benefit from the same.
It has also been proposed to prohibit insiders from communicating or providing access to UPSI to others unless required for discharge of duties or for compliance with law.
The committee has also proposed that every listed company should formulate a code of conduct to regulate, monitor and report trading in securities by its employees and other connected persons. Even auditors, law firms, accountancy firms, analysts, consultants who handle UPSI may formulate a code of conduct.
Experts feel that a look at the regulations was definitely required and it does address some of the concerns. “There was a need to improve the legal provisions and the committee has worked towards bringing more clarity on definitions and expanding their scope,” said Sandeep Parekh of FinSec Law Advisors.
Window for ESOP holders
The employee stock ownership plan (ESOP) has now become an important medium of incentivising the employees and it is even recognised by the regulator. However, if the regulation bans all insiders from trading them on the pretext that they have access to price sensitive information, it is not going to work.
The committee has provided a window to the ‘insiders’ that allows them to trade in securities through a pre-scheduled ‘trading plan’ where they will be required to disclose their trading plans for at least 12 months and would not be allowed to execute them before six months of such disclosure.
Experts say that through this option senior employees of the company will also be allowed to sell their holdings in the company, including ESOP holding. The committee, however, did not provide complete immunity from investigation on trading through such plan. “The committee decided that the trading plan would not provide absolute immunity from investigation into whether such manipulation of timing had been used to circumvent the prohibition on violative insider trading,” said the report.
Are stronger laws enough?
While experts agree that the a look into the existing two-decade-old regulations was much desired, they feel that the real task is to improve on the quality of investigation and taking it to its logical conclusion.
Legal experts feel that a lot of individuals escape from the charges not because the