SEBI rolls out new exposure formation under trading rules | Motilal Oswal

SEBI Introduces a New Disclosure Format in Accordance with Insider Trading Rules

Trading, which is known as ‘insider trading’, consists of a person who is involved with a company trading with the stock of the company in question. This might fall under the purview of being legal or not, according to the information that the ‘insider' has acquired. It also depends on the view of insider trading by SEBI, the Securities and Exchange Board of India, the authorized regulator of markets in India. 

  • Effects of Insider Trading

Now that you know insider trading meaning, you can clearly see how insider trading can affect the market rate of particular stocks in the event that individuals trade with these. However, this information isn’t public knowledge. Hence, the person on the inside, the insider, has an advantage that is obviously unethical. You can well imagine why insider trading is not looked at with rose-tinted glasses, as it gives an unfair edge to a set of investors, leaving out the rest. What insider trading may also do is reduce the regular investor’s confidence and trust level. 

  • What do SEBI’s rules mandate?

In the early part of 2021, SEBI introduced new rules managing insider trading. Coming out with a renewed format for disclosure, revised disclosure formats are based on feedback SEBI acquired from market participants as well as exchanges. SEBI guidelines state the following under new disclosure regulations of February, 2021:

- SEBI will require all details of securities held by individuals as and when the said individuals become members of a listed company’s group of promoters. 

- Blood relatives, or relations who are immediate, of members, are mandatorily required to be disclosed whether there are any alterations in shareholding or not. 

  • An Overview of Insider Trading Rules

Insider trading rules for stock market trading need to be enforced to provide a fair battleground for traders and regular investors alike. The potential for profit-making is thus justly distributed. With this in mind, SEBI had established a ban on such trading as far back as 1992. However, only in 2015, was this addressed formally, bringing about the ‘Prohibition of Insider Trading Regulations’. Furthermore, in 2019, SEBI had officially introduced a mandate that stated that all companies listed, and persons linked thereof, had to maintain a systematic database digitally. This database had to contain details of individuals who possessed ‘unpublished price-sensitive information’, along with the exact nature of the information in question. Since then, subsequent amendments were made, leading up to the recent ruling. 

  • A Positive Approach 

As the digital age has brought about transparency in every aspect of life, including, for the most part, in financial transactions and information sharing, the latest ruling by SEBI is bound to provide a fair playing ground for all traders. As a trader, equality is a requirement, and if you trade with Motilal Oswal, you may not get the perks of unfair insider trading, but you certainly will get advantages of a reputable broker and hints on how to trade smartly. 

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