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Only dealing in securities based on unpublished price sensitive information is prohibited and communication of price sensitive information per se is not an offense.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

Organization and management pattern of uti, Organization and Management Pat...

Organization and Management Pattern of UTI UTI has a full-time Chairman with an Executive Trustee reporting to him. The Executive Trustee looks after the Corporate Office, Zona

Perform appropriate ratio analyses on the balance sheet, Perform appropriat...

Perform appropriate ratio analyses on the balance sheet and income statements of your company using techniques discussed in chapter 2 of your textbook. Compare your company to a c

Qualification criteria for a bidder of contract, Q ualification criteria ...

Q ualification criteria We discussed how to prepare the bid documents. Let us now see what criteria should be considered to qualify a bidder. You will have to open bidding

Sunk cost, Sunk Cost This is a cost which has already been incurred and...

Sunk Cost This is a cost which has already been incurred and cannot be affected through present or future decisions.

Fin 2110, 1. Which of the following statements concerning the cash flow pro...

1. Which of the following statements concerning the cash flow production cycle is true? a) The profits reported in a given time period equal the cash flows generated. b) A company’

What is the matching principle of working capital financing, What is the ma...

What is the matching principle of working capital financing?  What are the benefits of following this principle? The matching principle is while short-term financing is used fo

Business venture, Project Plan for my new business venture is attached) ...

Project Plan for my new business venture is attached) 1.     Your task is to take a look at every of the operational areas of the intended business, and verify  what financial i

Estimating the market value of a share, Estimating the market value of a sh...

Estimating the market value of a share The dividend expansion model suggests a method whereby share values can be estimated from information on the required return on equity an

Why do we focus on cash flows instead of profits, Why do we focus on cash f...

Why do we focus on cash flows instead of profits when evaluating proposed capital budgeting projects? We focus on cash flows at the place of profits when evaluating proposed ca

Debentures, Debentures are also fixed income securities with a ...

Debentures are also fixed income securities with a specified interest rate. These securities have charge over the assets of the issuer. In contrast to

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