Insider trading, Financial Management

Assignment Help:

Insider Trading

Insider trading refers to dealing in securities by persons who are privy to specific information of companies. This possession of confidential information gives those persons undue advantage to either buy or sell the securities as the circumstances warrant. This specific information is not disclosed to the investors in the general course of business, and therefore, places them at a great disadvantage.

If the stock markets are to function efficiently, it is a prerequisite that the regulatory authority be in a position to identify such instances and take corrective measures. This also boosts the retail investors' confidence in the impartial working of the exchange.

The Securities and Exchange Board of India amended the SEBI (Insider Trading) Regulations, 1992 in February 2002 to provide for the following:

The regulation would now cover subscription in the primary issue based on inside information.

A person, who is an intermediary, investment company, trust company, asset management company or an employee or director thereof or an official of a stock exchange or of a clearing house or corporation, would be deemed to be a connected person.

Price sensitive information would mean any information, which relates directly or indirectly to a company and which if published, is likely to materially affect the price of securities of a company. Periodical financial results of the company, intended declaration of dividends (both interim and final), issue of securities or buy-back of securities, any major expansion plans or execution of new projects, amalgamation, mergers or takeovers, disposal of the whole or substantial part of the undertaking, and any significant changes in policies, plans or operations of the company would be deemed to be price sensitive information.

Speculative reports in print or electronic media would not be considered published information.

Only dealing in securities based on unpublished price sensitive information is prohibited and communication of price sensitive information per se is not an offense.

Corporate dealing in securities of another company based on inside information is specifically prohibited.

All listed companies and organizations associated with securities market including the intermediaries, asset management company, trustees of MFs, self-regulatory organizations, stock exchanges, clearing house/corporations, public financial institutions, professional firms such as auditors, accounting firms, law firms, analysts, consultants, etc., assisting or advising listed companies shall frame a code on internal procedure and conduct on lines of model code specified in Regulations. These entities shall abide by the Code for Corporate Disclosure Practices specified in the Regulations. They shall adopt appropriate mechanisms and procedures to enforce these codes.

Any person who holds more than 5% shares or voting rights in any listed company shall disclose to the company, the number of shares or voting rights held by such person, within four working days of the receipt of intimation of allotment of shares, or the acquisition of shares or voting rights, as the case may be. He shall also disclose to the company the change in shareholding or voting rights, even if such change results in shareholding falling below 5%, if there has been a change in such holdings from the last disclosure and such a change exceeds 2% of total shareholding or voting rights held by such person within four working days of becoming director or officer of the company. He shall also disclose the change in shareholding or voting rights, if there has been a change in such holdings from the last disclosure made and the change exceeds Rs.5 lakh in value or 5,000 shares or 2% of total shareholding or voting rights, whichever is lower. Every listed company, within 5 days of receipts of these disclosures, shall disclose to all stock exchanges on which the company is listed.

 


Related Discussions:- Insider trading

Principles of good regulation, Principles of Good Regulation While perf...

Principles of Good Regulation While performing its functions, the FSA needs to take into account certain matters which are termed the ‘principles of good regulation'. The matte

measuring yield spreads, A yield spread between any two bond issues ...

A yield spread between any two bond issues can be easily computed when the maturity date for both these issues is same. The yield spread between these two bond

Prepare a trend analysis for the balance sheet, • Prepare a Trend Analysis ...

• Prepare a Trend Analysis for the Balance Sheet, Income Statement and Cash Flow Statement • This should include about 12 accounts in the Balance Sheet and about 10 Income Statemen

Valuation and exit - hedge fund, Valuation and Exit Valuation: The Net ...

Valuation and Exit Valuation: The Net Asset Value is used as a base for ascertaining the prices applicable to investor subscriptions and redemptions. Fund administrator perform

Describe what is meant by application controls, QUESTION An audit team...

QUESTION An audit team is currently engaged in planning the audit of the financial statements of E Limited as at 30 June 2007. This was the first accounting period during which

Capital asset pricing model, Can you draw Capital asset pricing model with ...

Can you draw Capital asset pricing model with example and explain?????

Evaluation of money-market hedge, Evaluation of money-market hedge Expe...

Evaluation of money-market hedge Expected receipt after 3 months = $300000 Dollar interest rate over three months = 5.4/ 4 = 1.35% Dollars to borrow now to have $300000 l

Define the meaning of overtrading, Define the meaning of Overtrading Wh...

Define the meaning of Overtrading When  a  company  is  trading  at  a  very  fast  pace,  it  would be  generating  sales  on  credit  with  speed, so have a large volume of t

Types of rating - shadow rating, The issuer will not have to disclose...

The issuer will not have to disclose the rating to the public. The firm can, either independently or with the help of its investment banker, assess its shadow

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd