Letters Bound by the law

This refers to the report "New insider trading regulations effective today" (May 14). The Securities and Exchange Board of India (Sebi)'s revised insider trading regulations are a clear instance of overkill. As pointed out in the report, companies will find it extremely difficult, if not impossible, to ensure that they comply with the provisions.

It goes without saying that a director, even an independent one, is likely to be in possession of unpublished price-sensitive information (UPSI) about his company, and must adhere to strict legal and ethical standards, including trading only during the permitted period and under the disclosed trading plan. It is equally true that he/she can't be presumed to have UPSI about other listed entities. It is also not at all evident why he needs to file all his trades and disclose all his investments, in securities of entities where he is not a director. The Supreme Court has held that all directors can be sued if a cheque bounces, when it is a fact that no non-executive director is involved in the day-to-day management of a company.

If the Companies Act and Sebi keep on heaping fresh, fluctuating and patently unjustifiable liabilities and duties on directors, then companies will soon run out of people who want to serve as independent directors on any board.

P Datta Kolkata

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