Securities & Exchange Board of India Chairman M Damodaran, on Wednesday, said the stock market regulator was open to review the 10 per cent limit stake held by director or key management personnel in a company being brought under the insider trading guidelines.
Mr Damodaran assured that Sebi would adopt a consultative approach while finalising the norms relating to insider trading, adding “what we have put out on Tuesday is a paper for discussion. We will get, over the next month or so, views on that. After we take all those views on board, a clear position will emerge.’’
Observing that this was the practice followed in some other countries, including the United States, Mr Damodaran said that Sebi also wants to emulate this process.
Stating that whether 10 per cent limit of stake held by officers or promoters was too high or low would be finalised after receiving public comments, Mr Damodaran said the regulator has invited public comments on the paper by January 21.
New stipulation
According to the draft guidelines, a company insider is any officer, director or holder of more than ten per cent of company’s shares. By virtue of their position these people have greater access to price sensitive company information. The new stipulation, once approved, will come under the Sebi (Prohibition of Insider Trading) Regulations, 1992. Meanwhile, Sebi said, it will allow institutional investors including Foreign Institutional Investors (FIIs) to start short-selling from February 1, 2008. It had banned the short-selling, way back in 2001, in the aftermath of Ketan Parekh scam. Mr Damodaran said that “RBI has given its nod to FIIs for short selling. Now Sebi will allow it for all institutional investors from February 1. It would be for all institutional investors — both FIIs and domestic ones like mutual funds.”
Sebi, on Tuesday proposed that company insiders should surrender profits made in any equity-based securities transactions of the company, if both the buy and sell side of the transaction are entered into within six months of the other.
