Sebi panel to issue norms on handling unpublished price-sensitive info

Photo: Reuters
The Securities and Exchange Board of India (Sebi)-appointed committee on fair market conduct will submit its report in the next two weeks. It will have a special chapter on handling of price-sensitive information, said sources.


Sources added the 16-member committee, led by former law secretary TK Vishwanathan, has extensively deliberated on the measures to avoid leak of unpublished price sensitive information (UPSI).


Some of the committee’s recommendations will be - compulsory ledger of employees having access to UPSI, background checks for mid-rung employees, limited access to results by internal teams, and switching to real-time disclosure.

The development assumes significance as leak of UPSI over social media platforms, such as WhatsApp, had been a concern for the market regulator in the recent past. Sebi is probing leak of UPSI pertaining to results of about a dozen companies. Sources said Sebi’s investigations have hit a wall due to the absence of entities that might have gained from the leak.


“The WhatsApp leak has given impetus to the issue of handling of price-sensitive information at listed firms. The committee has taken inputs from stakeholders and shortlisted measures that can be implemented. The idea is to improve the paper trail with regard to the flow of UPSI,” said a source.


At the time of compiling quarterly results, several mid-level employees receive access to the information, but there are not enough checks and balances, say experts. The committee will recommend companies to mandatorily maintain a list of employees and external participants who are privy to such information. Further, all the employees who get access to the UPSI will have to sign a non-disclosure agreement. Currently, only the senior management has to sign such agreements.


The committee will recommend stricter background checks for employees handling UPSI. The panel could suggest restrictive flow of data among low-level employees as the company heads towards announcements of results.


Another key recommendation of the committee will be around real time disclosure of UPSI.


Currently, companies go on a ‘silent period’ before announcement of quarterly results. The belief is that the longer a company withholds price-sensitive information, more is the chance of a leak.


“In order to control any potential leak of UPSI, companies should have a physical and digital trail. On the physical part, the entities should be aware of the employees who have access to UPSI. Such employees should be asked to sign non-disclosure agreements. Companies can follow a pyramid structure where the access to UPSI gets more restricted as we approach the year-end or results season,” said Suveer Khanna, partner at KPMG.


The committee will suggest tweaks to the existing algo trading norms for providing equitable access to all investors.


The committee could suggest increased supervision for the algo and high frequency trading modules employed by various institutions and brokerages. Currently, a market participant needs the approval of stock exchanges to employ any new algos.


However, there is no mechanism for periodic monitoring. Several market participants have raised concern that some algos disrupt the market.

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