SEBI panel proposes new norms to prohibit insider trading
Among other proposals, whether an insider who has traded in securities is a connected person, the onus of establishing that he was not in breach of the prohibition will be on him
 
A high level committee appointed by market regulator Securities and Exchange Board of India (SEBI) has proposed bringing in public servants handling share price-sensitive information under its purview and put the onus on the insiders to prove they have not breached any law.
 
The new norms, which would also apply to mutual funds and trusts issuing securities or schemes that get listed on stock exchanges, would also require companies to seek entire holdings of all employees and third-party connected persons.
 
Besides, all trades by promoters, employees, directors and their immediate relatives (which would cover close relatives who are either financially dependent or consult the insider in connection with their trading) would be required to be disclosed to the company.
 
Besides, definition of the term 'connected person' has been changed to "explicitly include public servants who handle UPSI relating to listed companies".
 
Among other proposals, whether an insider who has traded in securities is a connected person, the onus of establishing that he was not in breach of the prohibition will be on him.
 
The Committee headed by Justice NK Sodhi, in its 74-page report said, "Simply put, the Proposed Regulations entail a prohibition on trading by insiders in securities when in possession of UPSI (Unpublished Price Sensitive Information), thus obtaining an unfair advantage".
 
Here are the salient features of the report…
1. While enlarging the definition of "insider", the term “connected person” has been defined more clearly and immediate relatives are presumed to be connected persons, with a right to rebut the presumption.  The term “immediate relative” would cover close relatives who are either financially dependent or consult an insider in connection with trading in securities. 
 
2. Insiders would be prohibited from communicating, providing or allowing access to UPSI unless required for discharge of duties or for compliance with law.
 
3. The regulations would bring greater clarity on what constitutes “unpublished price sensitive information” (UPSI) by defining what constitutes “generally available information” (essentially, information to which non-discriminatory public access would be available). A list of types of information that may ordinarily be regarded as price sensitive information has also been provided.
 
4. Trading in listed securities when in possession of UPSI would be prohibited except in certain situations provided in the regulations. 
 
5. Insiders who are liable to possess UPSI all round the year would have the option to formulate pre-scheduled trading plans. In such cases, the new UPSI that may come into their possession without having been with them when formulating the plan would not impede their ability to trade. Trading plans would, however, be required to be disclosed to the stock exchanges and have to be strictly adhered to. 
 
6. Conducting due diligence on listed companies would be permissible for purposes of transactions entailing an obligation to make an open offer under the Takeover Regulations. In all other cases, due diligence would be permissible subject to making the diligence findings that constitute UPSI generally available prior to the proposed trading.  In all cases, the board of directors would need to opine that permitting the conduct of due diligence is in the best interests of the company, and would also have to ensure execution of non-disclosure and non-dealing agreements. 
 
7. Trades by promoters, employees, directors and their immediate relatives would need to be disclosed internally to the company. Trades within a calendar quarter of a value beyond Rs10 lakh or such other amount as SEBI may specify, would be required to be disclosed to the stock exchanges.
 
8. Every entity that has issued securities which are listed on a stock exchange or which are intended to be so listed would be required to formulate and publish a Code of Fair Disclosure governing disclosure of events and circumstances that would impact price discovery of its securities.
 
9. Every listed company and market intermediary is required to formulate a Code of Conduct to regulate, monitor and report trading in securities by its employees and other connected persons. All other persons such as auditors, law firms, accountancy firms, analysts, consultants etc. who handle UPSI in the course of business operations may formulate a code of conduct and the existence of such a code would evidence the seriousness with which the organization treats compliance requirements.
 
10. Companies would be entitled to require third-party connected persons who are not employees to disclose their trading and holdings in securities of the company.

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Sensex, Nifty still on an uptrend

Nifty hit the support level of 6,286 on Wednesday and went up. The uptrend will be threatened only below 6,295

The market closed Wednesday in the negative for the second consecutive day, after hitting a three day low (including today). In the last few minutes the benchmark tried recovering the loss but failed to close in the positive.

 

Reserve Bank of India (RBI) Governor Dr Raghuram Rajan today said that the central bank's focus remains on controlling inflation. Rajan added the rupee had stabilised "somewhat", but said there is no room for complacency. He also called on the government to continue its efforts to contain the fiscal deficit and said raising subsidised diesel prices to market levels would help. Rajan also said the RBI would introduce measures to improve liquidity and depth in government bonds, known widely in India as G-secs. The Reserve Bank of India will announce next week’s steps to recognise and resolve financial stresses, including making it more expensive for so-called wilful defaulters to borrow funds.

 

The Sensex and the Nifty traded in the negative for the entire trading session. Sensex opened at 21,191 and Nifty at 6,307. In the last hour Sensex hit a low of 21,069 and closed at 21,171 (down 84 points or 0.39%) after hitting a high of 21,216. The Nifty hit a low of 6,280 from which it recovered to hit a high of 6,327 and closed at 6,307 (down 25 points or 0.39%). The NSE recorded a lower volume of 55.10 crore shares.

 

Among the other indices on the NSE, except for Media (up 1.14%); FMCG (up 0.63%) and MNC (up 0.18%) all the other indices closed in the negative. The top five losers were PSU Bank (2.16%); Infra (1.42%); Auto (1%); PSE (0.90%) and Nifty Midcap 50 (0.87%).

 

Of the 50 stocks on the Nifty, 19 ended in the green. The top five gainers were NTPC (2.32%); HDFC (1.86%); HCL Technologies (1.74%); Axis Bank (1.36%) and Coal India (1.26%). While the top five losers were Tata Motors (3.38%); Bank of Baroda (2.17%); State Bank of India (2.13%); BPCL (2.12%) and Tata Power (2.11%).

 

Out of the 1,220 stocks on the NSE, 460 closed in positive, 693 closed in the negative while 67 remain unchanged.

 

Rating agency Standard & Poor's (S&P) today said that India's sovereign rating may come under pressure if general elections due by May next year end up with a hung parliament or with a government unable to push through reforms. S&P has a "negative" outlook on India's sovereign ratings, meaning any downgrade from its current "BBB-minus" would place the country's debt in so-called "junk."

 

Finance Minister P Chidambaram today said that the government will not compromise on fiscal prudence and will contain its fiscal deficit and narrow it to 3% of gross domestic product by the fiscal year ending in March 2017. The comments come a day after Fitch Ratings had warned the setback for the Congress party in recent state elections could imperil the fiscal deficit target by tempting the government to have less restraint on spending. The finance minister also highlighted the government would do all it can to moderate inflation, given the RBI only has monetary policy as a "blunt tool" to contain rising food prices.

 

US indices closed in the negative on Tuesday. Investors weighed federal budget negotiations and better-than-estimated economic data to gauge the timing of any Federal Reserve stimulus cuts. The US budget deal, worked out between chief negotiators Senator Patty Murray and Representative Paul Ryan, would set spending at about $1.01 trillion in 2014, higher than the $967 billion required in a 2011 budget accord. A partial shutdown in October lasted for 16 days because lawmakers couldn't agree on how to fund the government. All the Asian indices closed on the negative. Hang Seng was the top loser which fell 1.71%.

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