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Only dealing in securities based on unpublished price sensitive information is prohibited and communication of price sensitive information per se is not an offense.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

Benefits of niche and specialisation markets, a) Ltd. stands for ‘private l...

a) Ltd. stands for ‘private limited company', i.e. a business with limited liability with shares being issued only to friends and family with the approval of the board of directors

Evaluate the use of market multiples, The annual report and accounts for As...

The annual report and accounts for Astra Zeneca plc and Epistem Holdings plc and other relevant financial information are available in the ‘TMA 02 Resources folder' in the Assessme

Working capital as a percentage of total assets, Q. Working Capital as a Pe...

Q. Working Capital as a Percentage of Total Assets? This approach of estimation of working capital requirement is based on the fact that the total assets of the firm arc consis

Define country risk, Define country risk. How is it different from politica...

Define country risk. How is it different from political risk? Country risk is a broader quantify of risk as compared to the political risk, as the former encompasses political ri

SES, Scenario: You are still a consultant for the Excellent Consulting Grou...

Scenario: You are still a consultant for the Excellent Consulting Group. You have completed the first assignment, developing and testing a forecasting method based on linear regres

Inflation rate is likely after year 1, a) Suppose that the real risk-free r...

a) Suppose that the real risk-free rate, r*, is 3% and that inflation is assumed to be 7% in Year 1, 5% in Year 2, and 4% after that. Suppose also that all Treasury securities are

Why do financial managers calculate the marginal tax rate, Why do financial...

Why do financial managers calculate the marginal tax rate? Financial managers make use of marginal tax rates to estimate the future after-tax cash flows from investments. As th

Financing costs incorporated into capital budgeting analysis, How are finan...

How are financing costs generally incorporated into the capital budgeting analysis process? Financing costs are generally captured in the discount or hurdle rate while doing NPV

Explain the market analysis of events, Question 1 Describe the Cost Vol...

Question 1 Describe the Cost Volume Profit analysis. Explain its features, objectives and elements(CVP analysis) Question 2 Write in detail about the classification of

Capital market-secondary market, Secondary Market The secondary market ...

Secondary Market The secondary market is also referred to as the stock market where dealings in shares are taken up. It helps the shareholders to find buyers for trading. Thus,

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