New regulations on insider trading soon

Sebi, govt in talks to iron out tax issues with the FPI framework

The Securities and Exchange Board of India (Sebi) is set to announce new regulations on insider trading soon. It is likely there would be more checks and balances to clamp down on the misuse of price sensitive information.

“The committee on insider trading norms is expected to submit its report as early as next week. It has have almost finalised it,” Sebi Chairman U K Sinha said on the sidelines of a seminar on the corporate bond market organised by CRISIL.

In April, Sebi had set up a 19-member high-level committee to review the country’s two-decade-old insider trading regulations. The expert panel is headed by former Securities Appellate Tribunal presiding officer N K Sodhi and has representatives from across segments such as legal, corporates, investment banking and stock exchanges. Before finalising the committee’s report, Sebi is expected to invite feedback on it.

Sebi is also working with the government on resolving tax issues with the foreign portfolio investment (FPI) framework, which has delayed its implementation. In October, the regulator had announced the Sebi (foreign portfolio investors) Regulations, 2013, which unified various portfolio investment routes, including foreign institutional investors (FIIs) and qualified foreign investors (QFIs) into FPI.

The Income Tax Department is said to have raised concern on the tax treatment to individual foreign investors under the new framework. During a panel discussion at the CRISIL seminar on Thursday, K P Krishnan, additional secretary in the Department of Economic Affairs, said discussions in this regard were underway between Sebi and the government. “In a couple of weeks, we should be able to figure a solution that is acceptable to foreign participants and to the revenue department,” he said.

Meanwhile, Sebi is also set to finalise regulations on real estate investment trusts (Reits) at its board meeting expected to be held next week. The regulator had issued Reit regulations in October and had, subsequently, invited feedback on these.

Sinha said, “Reits will pick up only when there is clarity on tax treatment. We have taken up this matter with the government.”

He added there a unified platform for corporate debt was vital to ensure more liquidity. “Today, we have an OTC (over-the-counter) platform, we have a stock market platform and we have FIMMDA (Fixed Income Money Market and Derivatives Association) platform. There is a serious need for all these platforms to be integrated. If we really want to make a vibrant and liquid bond market, we have to move seriously in this direction,” he said.

ON SEBI’S PLATE

• New regulations on insider trading
• Tax clarity on FPI regime
• Finalisation of Reit regulations