New insider-trading norms see cos rush to fortify digital compliance

PALAK SHAH | | Updated on: May 06, 2019
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Now, the onus of compliance with norms rests mainly with board members: Experts

SEBI’s insider-trading norms have pushed up the requirement for maintenance of a digital data base for listed companies and there is a rush for compliance-related software in the market, experts told BusinessLine .

The insider-trading norms which came into effect from April have forced companies to keep a digital record, which can be audited any time by the regulator, with regard to generation of unpublished price-sensitive information (UPSI). According to the new rules, any body found to be holding UPSI without purpose will be deemed to have indulged in insider-trading.

In the new regime, the onus of compliance with insider-trading norms rests mainly with the company’s board members, experts say.

“Simple excel files may not do. Digital database will have to maintained in a structured manner with adequate internal controls. It will have to include names of people with whom the UPSI is shared, nature of the UPSI, and checks such as time stamping and audit trails to ensure non-tampering of data. There is no room for manipulation of documents or hiding records,” said Dinesh Sharma, founder Volody, that designs compliance-related software. Sharma says corporates that have so far used technology for business cycle management, operations improvement, channel management, ERP and HR functions, are now required to use compliance-related software too.

SEBI has been categorical in its intentions. The guideline says: “The board of directors shall ensure that a structured digital database is maintained containing the names of such persons or entities, as the case may be, with whom information is shared under this regulation along with the Permanent Account Number or any other identifier authorised by law where PAN is not available.”

In the US when fund manager Raj Rajaratnam was convicted for insider-trading it was based on investigations that he had traded on UPSI from company board member Rajat Gupta. This was established via wire-tapping.

In India, even when several corporate bigwigs, promoters and those connected to the company have been found in possession of UPSI, SEBI has so far not been effective in holding them guilty of insider-trading.

Those who have come on the SEBI radar in the past include an independent director at Infosys, a senior executive at Sun Pharma, HDFC Bank, Axis Bank, Dr Reddy’s, Tata Steel, Wipro, Bajaj Finance, Mahindra Holidays, Crompton Greaves, Mindtree, Mastek and India Glycols, among others.



Published on May 06, 2019

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