Employees may be charged with insider trading

Mumbai: To tackle insider trading menace, a new set of norms will come into effect from Friday that provide for a strict penal action for illicit transactions in shares of listed firms by promoters, key management personnel, their relatives and all connected persons. The new norms, which would revamp nearly two-decade old regulations, would also ensure that genuine trades are not impacted.
Besides, greater clarity on concepts and definitions has been put in place along with a stronger legal and enforcement framework under the new set of norms called — Pro-hibition of Insider Trad-ing Regulations, 2015.

The tightening of norms assumes significance in the wake of Sebi coming across cases of insider trading not just at small companies but at big corporates as well. The market regulator, in January, had notified the new regulations on insider trading. Under the new framework, the definition of ‘Insider’ has been expanded to include persons connected on the basis of being in any contractual, fiduciary or employment relationship that allows such people access to unpublished price sensitive information (UPSI).

A ‘connected person’ is one who has a connection with the company that is expected to put him in possession of UPSI. The definition will also bring into its ambit persons who may not seemingly occupy any position in a company, but are in regular touch with the company and its officers who are involved in the know of operations. A connected person would be someone who is or has during the past six months prior to the concerned act has been associated with a company, directly or indirectly.

Besides, immediate relatives of connected persons would also come under the same category unless they prove that they were not privy to unpublished price sensitive information.
The onus of establishing that they were not in possession of UPSI would be with the connected persons. It has been decided to remove the requirement for repeated disclosures and ease compliance burden.