In an effort to deter insider trading, SEBI’s International Advisory Board (IAB) 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 international panel, which was set up in September 2011 to respond to the challenges arising from the global financial crisis, met in Bangalore over the last couple of days.
Apart from SEBI Chairman U.K. Sinha, the panel members include Viral Acharya, Professor, New York University Stern School of Business; Jane Diplock, Independent Director, Singapore Exchange; Russell Loubser, former CEO, Johannesburg Stock Exchange; Mark Maletz, Senior Fellow, Harvard Business School; Maureen O’Hara, Professor, Johnson Graduate School of Management, Cornell University; Arvind Panagariya, Professor of Indian Political Economy, Columbia University; and Andrew Sheng, Chief Advisor, China Banking Regulatory Commission.
The IAB has been mandated to help SEBI chart its future course by factoring in global experiences in regulation of financial markets.
The panel felt that major insider trading cases should be made easily accessible on the SEBI Web site, in a separate section.
With no global standards on cyber security of stock exchanges, depositories and clearing corporations, the group discussed the need for an adequate disaster-recovery system and business continuity plan. Managing internal sabotage by strengthening internal systems was the first step, the group felt.
INFRA INVESTMENT 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.
Drawing from the experience of real estate investment trusts (REIT) in Australia, the US, Hong Kong, Singapore and South Africa, the group proposed a separate framework for infrastructure investment trusts, as well as a gradual expansion of REITs to include retail investments.
An internationally competitive tax regime with pass-through status for REITs and oversight of managers and trustees has also been mooted.
Three SEBI whole-time members — Prashant Saran, Rajeev Kumar Agarwal and S. Raman — and executive directors participated in the two-day summit.