Listed Firm Brass Will Have To Bare Stake

Directors or officers who are insiders and substantial shareholders of listed companies will be required to disclose their shareholding on a continuous basis, according to the amended draft regulations on insider trading approved by the Securities and Exchange Board of India (Sebi) board today.

Substantial shareholders includes those who hold more than 5 per cent shares or voting rights in companies. These disclosures will be made to companies, which will inform the exchanges within a time-frame.

Senior Sebi executive director L K Singhvi said the board has also approved the creation of a preventive framework comprising internal procedures and code of conduct for listed companies and market intermediaries such as merchant bankers, brokers, registrars, mutual funds, stock exchanges, clearing corporations, depositories, financial institutions, auditing firms, legal firms, among others.

 

The code covers maintaining confidentiality of price-sensitive information through creation of appropriate Chinese walls, trading restrictions such as imposition of trading windows or restricting the securities they can trade in, internal reporting requirements, provisions for internal enforcement and imposition of penalties for contravening the code.

Listed companies have a clear-cut code of corporate disclosures which they have to follow. Disclosure of price-sensitive information (such as changes in shareholding pattern, ownership) would have to be done on a timely basis and analysts should not have the advantage of being privy to information which the general public does not have, Sebi said.

Singhvi said that these will become a part of the regulations and will be effective three months from the date of notification, which is expected to be done soon.