Bajaj , HDFC frame 'insider trading' codes, others to follow

With new insider trading norms coming into force on Friday, a host of companies, including Bajaj Auto, HDFC Bank, HDFC and YES Bank, have framed their codes of conduct to regulate and report stock trades by promoters, top executives, their relatives and connected persons.

Besides, Aurobindo Pharma, Axis Bank, BEML, Jubilant Life Sciences, Ashok Leyland, Tata Communi-cations, JK Lakshmi Cement and Hindustan Motors have formulated their respective Codes of Conduct, according to exchange data.

Many more firms are expected to follow suit.

These firms have formulated a code of conduct and a code of fair disclosure, comprising practices and procedures followed for fair disclosure and handling of Unpublished Price Sensitive Information (UPSI).

The companies have also started appointing compliance officers who will be responsible for adherence to the new norms and codes of conduct.

Under the new norms, the firms will have to deal only with those market intermediaries and other entities who have formulated a similar code of conduct in this regard.

The codes of conduct and fair disclosure will have to be published on companies' websites, too.

The new insider trading rules, which have kicked in today, provide strict penal action for illicit transactions in shares of listed firms by promoters, key management personnel, their relatives and all connected persons.

The new norms, which will revamp nearly two-decade old regulations, will also ensure genuine trades are not impacted.

Besides, there has been greater clarity on concepts and definitions, along with a stronger legal and enforcement framework, under the new set of norms called Prohibition of Insider Trading Regulations, 2015.

The tightening of norms assumes significance in the wake of Securities and Exchange Board of India (Sebi) coming across cases of insider trading not just at small companies but at bigger corporates as well.

Under the new framework, the definition of 'insider' has been expanded to include persons connected on the basis of being in any contractual, fiduciary or employment relationship that allows such people to access UPSI.

A 'connected person' is one who has a connection with the company that is expected to put him in possession of UPSI. The definition will also bring into its ambit persons who may not seemingly occupy any position in a company, but are in regular touch with the company and its officers who are involved in the know of operations.

A connected person would be someone who is or has during the past six months prior to the act concerned has been associated with a company, directly or indirectly.

The latest guidelines have been prepared after taking into consideration recommendations of the Sodhi panel and suggestions from various other quarters.