In a first-of-its-kind initiative, market regulator Sebi, starting September 3, is rolling out a crash course for senior bankers on insider trading and related compliances in Mumbai, aimed at sensitising bankers about the risks of misuse of price-sensitive information and ensuring it is not misused.
One senior banker, speaking on condition of anonymity, explained the regulator’s intent. “Many times, clients share price-sensitive information with staff due to the nature of the banking relationship. The idea is to ensure that such information is not misused.”
One source familiar with the plan said, “The first familiarisation session is being conducted in Mumbai, given the city’s position as the country’s financial hub and the base for most banks’ headquarters. Follow-up sessions are expected in Delhi and Chennai, with Kolkata also under consideration if the need arises.”
Moneycontrol had reported on May 5 that Sebi was considering such a training module for bankers. An email sent to Sebi seeking comments in this regard did not elicit any response.
People familiar with the matter said Sebi had been receiving inputs on instances of misuse of unpublished price-sensitive information (UPSI) by bank staff. One recent case involving a senior official at a private sector bank, who allegedly traded in shares of listed companies that were also clients of the bank, acted as a trigger for the regulator’s roll out plan. That said case is currently under investigation by Sebi.
The regulator believes that, in many instances, misuse of insider information by bank staff may not stem from malicious intent but from lack of awareness. By educating bankers through a formal program, Sebi hopes to reduce inadvertent violations.
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Bankers often deal with highly sensitive information that extends beyond their own institutions, which includes details of large loan sanctions, debt repayments, corporate actions, debt restructuring and committee of creditors (CoC) proceedings under the Insolvency and Bankruptcy Code. Since such sensitive information can significantly move stock prices, the regulator has stressed on the need for strict confidentiality.
Instances in the past where certain banking and financial stocks witnessed sudden price movements, later linked to regulatory actions such as business restrictions or removal of it, have raised suspicions of trading based on insider knowledge.
Though banks already have policies on handling insider information, sources said the regulator expects the crash course to identify and plug if any gaps in compliance practices. “The familiarisation will help bankers be extra cautious with UPSI and also improve monitoring within their organisations,” said a person aware of the program’s design.
The initiative of Sebi is seen as a proactive step in tightening its oversight on insider trading, particularly within the financial sector where exposure to sensitive information is frequent.
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