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Only dealing in securities based on unpublished price sensitive information is prohibited and communication of price sensitive information per se is not an offense.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

Plugging back of the future - important source of capital, Plugging back of...

Plugging back of the future of profit means the reinvestment by the concerns of its surplus in the business. it is an internal financial of the business and it is more suitable for

Compute the fair value of the stock, QUESTION Part A Lavista Ltd i...

QUESTION Part A Lavista Ltd is a leading music entertainment company in the country and the stocks of the company are actively traded in the stock exchange. For the year j

Analysis of financial statement, complete the balance sheet and sales infor...

complete the balance sheet and sales information using the following data: debt to assets ratio 50% current ratio 1.8x total assets turnover 1.5x day sales outstanding 36.5 days (c

Define and discuss indirect world systematic risk, Define and discuss indir...

Define and discuss indirect world systematic risk. The indirect world systematic risk can be illustrated as the covariance among a nontradable asset and the world market portfo

De-leveraged floaters, A floater where the coupon rate is computed as...

A floater where the coupon rate is computed as a fraction of the reference rate plus a quoted margin, are known as a de-leveraged floater. The general formula for this

Market versus capital market, For what kinds of needs do you think a firm w...

For what kinds of needs do you think a firm would issue securities in the money market versus the capital market?

Coupon rate, Bonds pay interest periodically at a pre-specified rate ...

Bonds pay interest periodically at a pre-specified rate of interest. The annual rate at which this interest is paid is known as the coupon rate or simply the coup

Example of a budget, Group Activity An example of a budget can be seen ...

Group Activity An example of a budget can be seen below. After viewing the budget, identify the possible reasons for the variations. Budget - Jul / Dec 200X

Explain why warrants are rarely exercised, Explain why warrants are rarely ...

Explain why warrants are rarely exercised unless the time to maturity is small? Warrants are seldom exercised till the time to expiration is small because the market price of the

International bonds, International bonds are the bonds issued in a country ...

International bonds are the bonds issued in a country by a non-domestic entity. In fact, it is a collective term used for Eurobonds, foreign bonds and global bonds.

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