New Delhi: Market regulator Sebi said on 2 January it is willing to review the 10% limit of stake held by directors or key management personnel in a company, proposed to be brought under the insider trading norms.
“What we have put out yesterday is a paper for discussion. We will get, over the next month or so, views on that. After we take all those views on board,” a clear position will emerge, Sebi chairman M Damodaran told reporters on the sidelines of a conference here.
He said whether 10% limit of stake held by officers or promoters was too high or low would be finalized after receiving public comments.
In a move to curb insider trading, the Sebi on Tuesday, 1 January, proposed that company insiders should surrender profits made in any equity-based securities transactions of the company, if both the buy and sell side of the transaction are entered into within six months of the other.
Damodaran said such practice was followed in many countries, including the US, and it was time to introduce this practice in India as well.
The new stipulation, once approved, will come under the Sebi (Prohibition of Insider Trading) Regulations, 1992.
Such a regulation was aimed at checking insiders, who have greater access to price sensitive company information, from taking advantage of information for the purpose of making short-term profits.
The regulator has invited public comments on the paper by 21 January.
Sebi said it assumed that insiders have a long term investment in the company and are not expected to make rapid buy or sell transactions, which are presumably based on at least some level of superior access to information, whether material or not.