Insider Trading Automation

SEBI has notified a stricter set of insider trading norms Sebi (Prohibition of Insider Trading) Regulations, 2015 on 15th January 2015 to check illicit transactions in shares of listed firms by management personnel and 'connected persons'.

What is Insider Trading

Two simple English words come together to create devastating consequences for Indian and Global Companies.
Thousands of crores of penalties are levied by SEBI for non compliance to Insider Trading, besides ban from capital markets, de-listing, criminal proceedings are more.

So, in simple words, the meaning of insider trading is ‘the trading of shares based on knowledge not available to the rest of the world. The Securities scam of 1992 brought to light the wide prevalence of insider trading on Dalal Street. SEBI was established in 1992.

SEBI and Insider Trading Regulation

The new norms, which will revamp nearly two-decade old regulations on insider trading and come into effect after four months, would also ensure that genuine trades are not impacted. Insider trading refers to dealing in securities after having access to unpublished price sensitive information and such practices provide unfair advantage to the entity who has privy to such details.

To address growing concerns of insider trading and to ensure smooth functioning of capital markets in a transparent manner, The Securities and Exchange Board of India ("SEBI") finally notified the SEBI (Prohibition of Insider Trading Regulations) 2015 ("Regulations") on January 15, 2015 replacing the two-decade old insider trading norms in India. The regulation is effective May 15, 2015

The new Regulations from SEBI which have come into effect from 15th May 2015, are much exhaustive in scope and coverage. The definitions of many terms are widened, the term connected person is almost anybody and everybody connected directly and indirectly with the Company.

Sebi has expanded the definition of 'Insider' to include persons connected on the basis of being in any contractual, fiduciary or employment relationship that allows such people access to unpublished price sensitive information (UPSI). A connected person would be someone who is or has during the past six months prior to the concerned act has been associated with a company, directly or indirectly.

Need for Automation

Establishing a database of connected persons is a huge task to be done in excel. Top it up with the pre-clearance, monitoring of trading window for each trade for each connected person is an impossible task. Automation or Insider Trading Management System enables entities to comply with the regulations and stay on top.

ITMS Overview

Insider Trading Management System (ITMS) is an enterprise-class web application which can automate and address the challenge of complying with regulatory requirements specific to insider trading. It serves as a central repository of insider related information for reporting and analytics.

ITMS helps organizations easily capture details about "Insiders" and their relatives as per the policy definition. A workflow enabled pre-dealing approval as well as post trade update mechanism brings efficiency to request handling.

A configurable "Trading Window" and automated alerts & notifications add flexibility to the system.

ITMS Features

  • Insider Information Collection is a process to build the user and relatives information or who may be terms as connected person. The tool provides for self update of the profiles.
  • Trading window management includes configuration of blackout period and automated alerts and notification of opening and closing of trading window.
  • Built-in work flows for the process including pre-trading request/approval/rejections, and post trading disclosures.
  • Provides a work-flow for employees to submit pre-trading requests, compliance officer can view all the pre-trading approval requests in a central system, compare with restricted securities (grey list) and approve/reject the request.
  • Automatic reminders are generated from the system for initial and continual disclosures, post-trading updations.
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