MC EXCLUSIVE A crash course for top bankers in insider trading likely as SEBI seeks to sensitise top management: Sources

SEBI

Market regulator Securities and Exchange Board of India (SEBI) is likely to launch a crash course for listed banks' top officials like MD&CEOs, compliance officers and even independent directors of bank. The idea of the regulator is to sensitise the leadership and key people about price sensitive information, which the bank staff are in possession of, and is prone for misuse. A senior regulatory source, on the condition of anonymity, said, “It’s better to sensitise, sometimes it's not a matter of intent but lack of awareness or understanding about price sensitive information”. The said source further said, “The first such crash course session could be launched as early as June”.

The trigger behind such a crash course is incidents in the recent past and some old incidents also, where it was alleged that insider information may have been misused. As per another source, “The bank staff are aware of not only their own bank's insider information but also third-party information, like big loan sanctions, debt repayment, debt settlement, and CoC proceedings-related information, which may be price sensitive”. CoC is committee of creditors, which initially approves or rejects resolution plan under Insolvency and Bankruptcy Proceedings, before the proposal is sent to NCLT for approval.

As per one market source, “There have been incidents in the past where sudden surge or decline was observed in share prices of financial companies including banks before the exchanges were informed about regulatory restrictions or easing of it”.

As per the sources quoted above, the regulator was receiving inputs from some quarters of market about the need for higher degree of surveillance of listed financial companies shares, but it was decided to try the awareness route first. If things are found at large scale and it persists then other available options will be exercised. A source further said, “Banks may have their own policy on insider information but after crash course if any gaps are there, it is expected that it will be filled”.

Corporate lawyer and Partner at Finsec Law Advisors, Anil Choudhary says, “Each company have their own nuances and mandating a universal theoretical course would not be a solution. Rather, SEBI can mandate that listed banks/top 1000 companies should carry out internal sessions wherein employees can be made aware of PIT regulations and create processes that are relevant and effective for the company”.

An email sent to SEBI seeking comments on the proposal did not elicit any response.