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SEBI proposed strict norms for insider trading
Dec 11, 2013

The International Advisory Board (IAB) of the Securities and Exchange Board of India (SEBI) in an effort to deter insider trading has suggested a heavy penalty, as well as naming and shaming of offenders, in such cases. It has also called for compensation to be provided to victims of insider trading and legal protection for whistleblowers as well as the framing of an effective whistleblowing policy.

The IAB also suggested that the market regulator should publicise major insider trading cases in a separate section on the SEBI website for easier access and encourage an effective whistle blowing framework in the securities market by ensuring adequate legal protection of whistle blowers.

The IAB, while deliberating on the formula-based determination of consent mechanism, suggested judgmental variations in consent amount on a case-to-case basis so as to make it effectively deterrent in nature. On real estate investment trusts (REITs), the IAB suggested for the gradual expansion of REITs to include retail investments and a separate framework for infrastructure investment trusts.

The IAB panel has also sought to strengthen the consent mechanism for settlement of cases. The consent mechanism enables offenders to settle cases with SEBI without admission or denial of guilt, on payment of an amount and compliance with terms approved by SEBI’s high-powered advisory committee.


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