The Securities and Exchange Board of India (Sebi) has proposed easing restrictions on trading plans for company insiders. The current framework, which was introduced in 2003, requires insiders to file a trading plan with the stock exchange at least six months before they can execute any trades. The plan must also cover a minimum period of twelve months.
Sebi believes that the current framework is onerous and not very popular. In a consultation paper released on Monday, Sebi said that only 10% of the trading plans filed in the last three years were actually executed. The regulator also said that the current framework is not effective in preventing insider trading.
The Working Group that was formed to look into this matter has recommended reducing the minimum cool-off period from six months to four months. The Working Group has also recommended reducing the minimum coverage period from twelve months to two months. Additionally, the Working Group has recommended giving insiders more flexibility to provide price limits.
Sebi has also proposed that full disclosure of personal details of insiders should be made to the stock exchanges, but a separate disclosure without the personal details must be made for the public.
The proposals are open for public comment until October 15. Sebi will then take a final decision on the matter.
Key Recommendations of the Working Group
- Reduce the minimum cool-off period from six months to four months.
- Reduce the minimum coverage period from twelve months to two months.
- Give insiders more flexibility to provide price limits.
Sebi Consultation Paper Proposals
- Full disclosure of personal details of insiders should be made to the stock exchanges.
- A separate disclosure without the personal details must be made for the public.
Sebi’s Rationale for the Proposed Changes
- The current framework is onerous and not very popular.
- The current framework is not effective in preventing insider trading.
Impact of the Proposed Changes
- The proposed changes would make it easier for insiders to trade their shares.
- The proposed changes would make it more difficult for Sebi to detect insider trading.
Industry Reaction
- Industry bodies have welcomed the proposed changes.
- Some experts have expressed concern that the proposed changes could make it easier for insiders to engage in insider trading.
Next Steps
- The proposals are open for public comment until October 15.
- Sebi will then take a final decision on the matter.
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