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INSIDER TRADING
CORPORATE GOVERNANCE AND ETHICS

PRESENTED BY: GROUP 10, SECTION 2 ANISHA JHAWAR FT13208 GAURAV PARIKH FT13221 KRITI DUA FT13234 NANDITA KRISHNAN FT13247 PRASHANT MISHRA FT13259 ROHIT SHARMA FT 13271 TILAK SHRIVASTAVA FT13283

HISTORY OF INSIDER TRADING REGULATION IN INDIA

Insider trading in India was unhindered in its 130 year old stock market till about 1970.
In 1979 , the Sachar committee recommended amendments to the companies Act,1956 to restrict prohibit the dealings of employees . Penalties were also suggested to prevent the insider trading. In 1986 the Patel committee recommended that the securities contracts Act ,1956 may be amended to make exchange curb insider trading and unfair stock deals. In 1989 the Abid Hussain committee recommended that the insider trading activities may be penalized by civil and criminal proceedings and also suggested the SEBI formulate the regulations and governing codes to prevent unfair dealings. India through SEBI regulations 1992 has prohibited this fraudulent practice . These regulations were drastically amended in 2002 and renamed as SEBI regulations 1992.

REGULATIONS RELATED TO INSIDER TRADING IN INDIA

The Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations 1992 requires that a person who is connected with a listed company and is in possession of any unpublished price sensitive information (UPSI) likely to materially affect the price of securities of company, shall not on his behalf or on behalf of any other person deal in securities or Communicate such information to any other person, while in possession of such information shall not deal in securities. Provided that nothing contained above shall be applicable to any communication required in the ordinary course of business

REGULATION 3

I. II.

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REGULATION 3A

No company shall deal in securities of other company or associate of that other company when in possession of any unpublished price sensitive information.

VIOLATION OF THE PROVISIONS

Any insider who deals in securities in contravention of the provisions of regulation 3 or 3A shall be guilty of insider trading.

INVESTIGATION
If the Board suspects that any person has violated any provision of these regulations, it may make inquiries with such persons

The Board may appoint one or more officers to inspect the books and records of insider(s)
The investigating authority shall, within reasonable time of the conclusion of the investigation, submit an investigation report to the Board. The Board may also appoint a qualified auditor to investigate into the books of account or the affairs of the insider

PROCEDURE FOR INVESTIGATION

On Complaints / Suo-moto Appointment of Invtg. Auth.

Notice Issued

On Conclusion Report to Board

To provide all assistance

Investigation Started

Findings to suspected person

Shall Reply within 21 days

Board will Issue directions

For market

DISCLOSURES FOR PREVENTION OF INSIDER TRADING Listed companies and organizations associated with securities

To frame a code of internal procedures. To abide by the Code of Corporate Disclosure Practices as specified in Schedule II of the Regulations. To adopt appropriate mechanisms and procedures to enforce the codes. Action taken against any person for violation of the code shall not preclude the Board from initiating proceedings for violation of these Regulations

+ INITIAL DISCLOSURE - Disclosure of interest or holding by directors/officers in

listed companies

Any person who holds a stake greater than the 5% of the paid up capital of the company, the acquiring company should inform the Stock Exchange with in 2 days of acquiring the stake. The new director should disclose all its trade position in Equity or derivatives with in 2 days of its appointment.

CONTINUOUS DISCLOSURE

If the director changes its holding by 2% . Investment of Rs. 5 Lacs or 25000 shares or buying 1% stake of the paid up capital which ever is the least should be disclosed.

All holdings in securities of that company

Periodic statements of all transactions Annual statement of all holdings

Any other disclosure of the company to stock exchanges.

MODEL CODE OF CONDUCT FOR PREVENTION OF INSIDER TRADING

A compliance officer is required to be appointed by the company. Employees/directors shall maintain the confidentiality of all Price Sensitive Information. The company shall specify a trading period, to be called trading window, for trading in the companys securities. The trading window shall be closed during the time the information is unpublished and employees/directors shall not trade in the companys securities during such period. Any director/officer who wishes to deal in the securities of the company should take pre-clearance of the trade. Any employee/officer who trades in securities or communicates any information for trading in securities in contravention of the code of conduct may be penalized.

SEBI may take appropriate action for violation of its regulations.