The Securities and Exchange Board of India (SEBI) is set to come out with new guidelines to curb insider trading soon. The market watchdog also plans to come out with new rules for share buyback in order to protect and reward the interest of shareholders.
According to SEBI Chairman, U K Sinha, the current regulations on insider trading was “old” and lot of developments have taken place recently necessitating changes in the regulations.
“We have set up a committee to look into the matter of insider trading and they will start their work soon. We are hopeful of coming out with the necessary regulations by the end of this year,” Sinha said at an interactive session organised by the Confederation of Indian Industry here on Tuesday.
The capital market regulator also came down heavily on listed private companies which had not initiated steps to increase public shareholding to a minimum of 25 per cent.
In late 2010, SEBI had come out with norms asking private companies to maintain a minimum shareholding of 25 per cent and had given a deadline of June 2013 to make themselves compliant with the norms.
According to Sinha, there were 200 such private companies, which were non-compliant. However, nearly 112 companies have initiated steps to increase their public shareholding to the mandated levels.
While trading has been suspended for 37 out of those 200 companies, nearly 51 companies have not initiated any measure to comply with the norms, he said.
“I don’t want to issue a threat to them in this meeting but I have made it very clear that those who will not follow SEBI guidelines for minimum public shareholding will suffer the consequences. And those consequences are not very difficult to assume,” he said.
Chit Funds
The SEBI Chief also expressed concern over the mushrooming chit fund industry in the eastern region.
According to Sinha, the Central Government should formulate new laws to set up a ‘single regulator’ to take action against such companies.
A number of investors, particularly in the eastern part of the country, were choosing to get into investment schemes which were “not legal,” he said.
“People are raising money by promising investors that it would be doubled in four years. Companies are also giving 15-25 per cent commission to agents. I just cannot think of any legitimate business where people can get that kind of rate of returns,” he said.