Securities and Exchange Board of India (SEBI)
Ref : SE/10466
September 10, 1991
To:
The Presidents/Executive Directors
of all recognised Stock Exchanges in India
Dear Sir,
Status of implementation of decisions
Please refer to our letter dated February 4, 1991 enclosing a copy of directive issued by the Ministry of Finance F. No. 14/3/SE/85 dated November 14, 1985 regarding review of the existing system of Bye-laws and Regulations of Stock Exchanges relating to trading in securities and you were requested to ensure implementation of the instructions issued by the directive. It was, inter alia, indicated therein that every stock broker must report to the Stock Exchange on a daily basis, scrip-wise list of names of parties, who have purchased or sold shares of the market value of more than Rs. 1 lakh in cash or settlement basis. In this connection, we enclosed for your information a copy of a press report which appeared in the Asian Wall Street Journal of August 14, 1991 indicating the prescription by the Securities and Exchange Commission in the United States of reporting rules for large securities transactions, the contents of which are self-explanatory. It needs hardly any emphasis that such reporting requirements by member-brokers are a must if the secondary market has to function on healthy lines and undue speculation and insider trading in securities are kept under a reasonable check. You are, therefore, once again requested to please prescribe disclosure of information by member-brokers to the Exchange authorities of large transactions by their clients in conformity with the above Government directive and send us report on implementation of the same by 1st November 1991.
Yours faithfully,
sd/-
(A. L. Bhatia)
THE ASIAN WALL STREET JOURNAL
SEC To Propose Reporting Rules For Large Securities Transactions
By Kevin G. Salwen
Staff Reporter
WASHINGTON – The Securities and Exchange commission is expected to propose rules today for reporting large securities trades to the agency.
The proposals are the SEC’s details work for the Market Reform Act legislation passed last year to give the agency a better understanding of large players’ activities in the market. That bill stemmed from The SEC’s frustrations over the stock market drops of 1987 and 1989, after which the agency realised it didn’t have as good a view of the market as it wanted.
In particular, SEC staffers were frustrated in trying to piece together program trades that they suspected helped fuel the declines in stock and futures prices. While the Commodity Futures Trading Commission could see the commodity side of the trades through its large-trade reporting system, the SEC found itself asking firms to comply voluntarily with investigations of the market drops.
“This will give us the ability to reconstruct trading activity in a much more efficient way,” said SEC Commissioner Mary Schapiro. “If we’d had this in October 1987, we could have much more quickly analysed the causes of the crash. In addition, it also gives us an enforcement tool to find illegal trades.”
The proposal would require large investors to file annual forms with the SEC that disclose their names, affiliations and accounts. Large traders are defined by the agency as any market player that trades either 100,000 shares or $4 million in total market value during a 24-hour period. Program traders would be included regardless of their trading volume.
Investors then would be assigned an identification number by the SEC, allowing the agency to compile more complete records on each large investor.
The rules would require brokerage houses to maintain records of large transactions through those ID numbers. The firms also would be required to keep records of all transactions for accounts that haven’t been identified as “large trader” accounts, but which the firm knows or suspects are.
At the SEC’s request, brokerage houses would be required to turn over records to the agency for all large traders’ transactions of at least 1,000 shares or $40,000 market value. All program trades again would be automatically included.
The plan is a scaled-down version of what the SEC originally wanted. When it requested the legislation two years ago, the SEC sought to have firms report the information to the agency automatically. But Wall Street complained that the plan would be too expensive, and a compromise program was created to have brokerages store the data.
At today’s open meeting, the SEC also is expected to adopt a rule allowing foreign banks and insurers to sell their securities in the U.S. without registering as investment companies or seeking exemptions to that registration. The move is a streamlining of current law.
