 "Bank staff investments via PMS amount to insider trading: Sebi")
Bank employees investing in portfolio management schemes (PMS) could be construed violating insider-trading norms, according to the Securities and Exchange Board of India (Sebi). Replying to a clarification sought by HDFC Bank, the market regulator said such investments could be “assumed to be motivated by the knowledge and awareness” of insider information.
HDFC Bank had sought Sebi’s views on whether investment by its employees, who might be in possession of unpublished price-sensitive information (UPSI) in PMS would come under the ambit of insider trading. The bank also submitted that its employees have no discretion in the investments made by PMS managers nor do they make any suggestions to them. “Whether it is direct or indirect is not relevant... But any insider when in possession of UPSI should not deal in securities of the company to which the UPSI pertains. Even while dealing in such securities through a discretionary portfolio management scheme, the trades of insider shall be assumed to be motivated by the knowledge and awareness of UPSI,” Sebi said in its reply.
Insider-trading regulations “unambiguously state that no insider shall trade in securities that are listed or proposed to be listed on a stock exchange when in possession of UPSI,” Sebi added. The clarification given is merely a view given by Sebi and it is neither obligatory nor binding.
