Securities and Exchange Board of India (SEBI)
SR. EXECUTIVE DIRECTOR
November 1, 1993
To,
The Presidents/Executive Directors of all Stock Exchanges
Dear Sir,
Insider Trading Norms for Exchange Employees
The Securities and Exchange Board of India (Insider Trading) Regulations, 1992, have been notified on November 19, 1992. Regulation 2(h)(ii) of the Regulations, includes officials and members of Stock Exchanges as persons “deemed to be a connected person”. In view of the fact that companies, to comply with the Listing Agreement, furnish various types of Price Sensitive information, to the exchange, it is our suggestion that you may work out and prescribe for officials and employees of your exchange internal norms for the following items:-
1.Identification of types of intimations given by companies to Stock Exchanges which could be considered to be price sensitive in relation to companies listed on your exchange, their associates and subsidiaries. For e.g. (a) earnings forecast or material changes therein. (b) proposals for mergers and acquisitions. (c) significant changes in investment plans. (d) acquisition or loss of a significant contract. (e) significant disputes with major suppliers, consumers or sub-contractors. (f) significant decisions affecting product pricing, profitability etc;
2.Identification of employees/officers or sections of employees/officers of the exchange who are likely to have access to such information;
3.Nomination of an officer or officers who would give clarifications to employees, of the exchange, regarding their ability to deal in securities without attracting charges of Insider Trading;
4.The controls on handling price sensitive information and the dissemination of such information, as fast as possible, so as to eliminate the non-public character of such information;
5.In regard to receipt of information from companies, you may devise standard written procedures for the receipt, processing and dissemination of such information to members of your exchange. The procedures may also incorporate a time frame.
6.Declaration of purchase and sale of securities subject to a minimum limit to be obtained from employees and officers. This should include transactions done by relatives of employees and officers.
7.Identification of employees/officers, whose relatives (as defined in Section 6 of the Companies Act, 1956 read with Schedule 1A of that Act) are engaged in dealing in securities, as member of exchanges(s), sub-brokers(s), or other itermediaries, as principal, director, partner or employee.
You will appreciate that the above items have been given only as illustrative and do not form any exhaustive list of items that need to be covered. We may be apprised of the steps taken by Stock Exchanges in this matter.
Yours faithfully,
sd/-
C. B. BHAVE
cc: Shri S T Gerela (P K Singhal)
Officer,
Securities and Exchange Board of India,
Mittal Court, ‘B’ Wing,
Nariman Point,
Bombay 400 021.
