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Sebi to draw up code of ethics for elected directors of bourses

The Securities and Exchange Board of India has decided to set up a small group to draw up 'code of ethics' for elected directors, functionaries of the stock exchanges across the country. This is being done to make it mandatory for them to declare their proprietary transactions in securities to the government board of stock exchanges.

The group likely to be headed by retired judge and the names of the members of the group would be finalised within couple of days, Sebi chairman D R Mehta said.

Addressing the press after the annual meeting of stock exchanges, Mehta described that non-functionaries (employees of the intermediaries regulated by the Sebi) would also come under the purview of these codes and need to follow the norms likely to be formulated by the group.

"I hope the code will be implemented by the beginning of current financial year," Mehta said confidently.

Mehta further said that the ethics committee (group) will be assisted by an compliance officer at the respective stock exchanges.

The proposed code seeks to establish a minimum level of professional and business ethics to be followed by functionaries of the level of general manager and above. The code will cover areas pertaining to exercising of due diligence in performance of duties, and avoidance of conflict of interest between directors, key functionaries and the interest of the exchange and investors, Mehta said.

Dealings in securities by key functionaries who have access to non-public price-sensitive information like margins and positions of other market participants, shall be subject to trading restrictions laid down in the Sebi insider trading regulations. All transactions would have to be held for a minimum period of 60 days or the period determined by the group (exchange).

These people will not be allowed to sell any security which has not been held by them for a minimum time period, in their name. No director shall participate in decision making/adjudication in a case where he/she is an interested party, Mehta said.

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