To send across a strong message to manipulators, capital market regulator Sebi is mulling over ways for more stringent enforcement actions in cases of high- profile and glaring violations of insider trading norms.
A revision of nearly two-decade old set of insider trading regulations is currently underway and the new norms are expected to be put in place in about a month after clearance from the Sebi board, a senior official said.
At the same time, efforts are being made to comply with a principle of dealing more stringently with glaring violations and high-profile cases, he added.
While the new insider trading norms are being framed as per wide-ranging reforms suggested by a Sebi-appointed panel, the regulatory body's International Advisory Board (IAB) has also suggested significant changes in Sebi's insider trading regulations to bring them at par with global best practices.
Insider trading -- dealing in securities with prior access to unpublished price-sensitive information -- has been attracting regulatory attention worldwide.
However, certain outdated provisions of existing norms have been misused by the offenders to escape regulatory action.
The IAB has also suggested that "heavy penalty along with naming and shaming may be used as a major deterrence to insider trading and other offences in the securities market".
Sebi was also asked to "publicise major insider trading cases through various means including in a separate section on Sebi website for easier access", while IAB also sought provisions to compensate victims, if any, of such offences.
In an Action Taken Report on suggestions made by IAB, Sebi said that its orders are made public through various forums whenever there are major enforcement actions on Fraudulent and Unfair Trade Practices or Insider Trading.
Besides, Sebi website is also being revisited for better dissemination of information from users' perspective, the regulator said.
On dealing more stringently with glaring violations of high-profile nature, Sebi said that "efforts are being made to comply with such principle", while it has also issued internal guidelines for adjudicating officers which envisage stringent penalty for insider trading.
On heavy penalty and 'naming and shaming' measures, Sebi said that the regulations provide for heavy penalty of Rs 25 crore (Rs 250 million) or three-times of ill-gotten profits, whichever is higher, for the offence of insider trading.
The regulator said that the orders imposing heavy penalty are put up in public domain and a press release is also issued, while giving example of a huge penalty of Rs 1,850 crore (Rs 18.50 billion) it recently imposed in the matter of Satyam fraud.
On provisions to compensate victims, Sebi said that the "nature of insider trading offence is such that it is impracticable to ascertain which shareholders had actually lost because of an offender's trade".
While Sebi does not have power to compensate, it can disgorge ill-gotten profits, and restitution is possible from disgorgement amount if victims of a fraud are identifiable.
The new amendments to the Sebi Act provides for explicit power of disgorgement, while the Investor Education and Protection Fund regulations have been amended to provide for restitution, the regulator said.
