Mumbai, Apr 20 (UNI) The Federation of Indian Chambers of Commerce and Industry (FICCI) has urged Securities and Exchange Board of India (SEBI) to retain the announcement of bonus and rights issue within the ambit of its insider trading policy as stock prices are sensitive to such announcements.
In a memorandum to SEBI on the proposed amendments to the SEBI (Prohibition of Insider Trading) Regulations 1992 (Insider Trading Regulations), FICCI said the management of a company should be authorized to decide and create window freeze and also decide on the class of persons to whom such window freeze would be applicable to bar insiders (traders) from trading.
However, FICCI welcomed the proposal that the regulations should not freeze legitimate trading by the 'Specified Persons', ''Companies should either designate a single broker through whom all transactions in stock by insiders are completed, or require insiders to use only one designated broker who will agree to the procedures set out by the company'', said the proposal.
As per FICCI findings, the big companies with large number of employees spread across various geographical locations, appointing designated brokers is not feasible as there would be instances of legitimate employees registered to carry out on-line trading.
An alternative would be to allow employees to obtain certification from brokers, the proposal said.
SEBI's proposal based on the introduction and inclusion of derivatives in 2000 to bring all dealings in securities within the ambit of the Regulations to widen the scope of term shares to securities, which would include Equity Derivatives for the purpose of disclosures came under scrutiny.
The proposal pointed on penalization of ''tippees'' viz, recipient of insider information for trading. There is no real need for this, since the tippee is already prohibited from dealing in securities while in possession of unpublished price-sensitive information, FICCI said.
In addition, the FICCI proposal seeks to address the often sensitive and neglected issue of Insider Trading Regulations, which post 2002 Amendments, 'no due diligence is capable of being conducted without the ambiguity of whether any due diligence would constitute a violation'.
The proposal also pointed out anomalies that could occur while investing in companies by indicating that while SEBI has taken a position that due diligence is needed before investing in listed companies, the ban on communicating information and the proposed penalizing of receipt of information is in 'direct conflict with the need to conduct due diligence'.
The memorandum further mentioned that the removal of criminal penalties attached to corporate governance measures be deleted in compliance of the provisions of the regulations in letter and spirit.
FICCI has also highlighted ambiguities in SEBI's Consultative Paper on 'Short Swing Profit' regulations in India, where designated insider' proposes to cover management personnel, directors, officers of the company 'who are the beneficial owners, directly or indirectly, of 10 percent or more of any class of equity securities'.
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