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Only dealing in securities based on unpublished price sensitive information is prohibited and communication of price sensitive information per se is not an offense.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

Credit enhancement of asset-backed security, Credit enhancement of an...

Credit enhancement of an asset-backed security implies the existence of support for one or more of the bondholders in the structure. Credit enhancement levels var

Show the difference between revenues and costs, • Sales revenue line drawn ...

• Sales revenue line drawn and labelled correctly and accurately • Fixed cost line (at $1,020) labelled and drawn accurately and correctly • Total costs line (starting at $1,

#titleEvaluate alternative hedging strategies, Peak Inc. needs to order Can...

Peak Inc. needs to order Canadian raw materials to use in its production process. The Canadian exporter typically invoices Peak in Canadian dollars. Assume that the current exchang

List the main features of ordinary shares, Question 1 Describe the types o...

Question 1 Describe the types of investment decisions Question 2 List the main features of ordinary shares Question 3 List the assumptions of Walter's dividend model. Ex

What is bid, Bid The price buyers provide to acquire securities or pri...

Bid The price buyers provide to acquire securities or privacy from sellers.

Principles of corporate governance, Principles of corporate governance ...

Principles of corporate governance Leadership: Every corporation should be headed by a proficient BOD which should exercise leadership, venture, honesty and judgments in dire

Leverage, evaluate the importance of leverage in a small scale company

evaluate the importance of leverage in a small scale company

Explain risk adjusted discount rate method, Q. Explain Risk Adjusted Discou...

Q. Explain Risk Adjusted Discount Rate Method? In the risk adjusted discount rate method the future cash flow from capital projects are discount at the hazard adjusted discount

Yield curve - influence the rate of interest, Q. Yield curve - influence th...

Q. Yield curve - influence the rate of interest? The normal yield curve demonstrates that the yield required on debt increases in line with the term to maturity. One reason for

Differences between indirect costs and direct costs, a) Variable costs: Rem...

a) Variable costs: Remuneration of flight attendants, Meals and drinks onboard, Fuel. Fixed costs: promotions and Advertising, Remuneration of administrative staff and Airport c

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