The Rights of the Deceased: Moral Rights Incidental to Copyright Law
- Vanshika Agrawal
- 2024-04-25
Listed Indian firms’ employees, including foreign nationals, are required to follow the code of conduct while trading in American Depository Receipts (ADRs) and Global Depository Receipts (GDRs), the Securities and Exchange Board of India (SEBI) said on November 4. Trading in such depository receipts is covered under the Prohibition of Insider Trading (PIT) Regulations, SEBI clarified. “For such disclosures by such designated persons,
a unique identifier analogous to PAN may be use,
” the regulator said in a list of frequently asked questions on PIT Regulations.
Further, the capital markets regulator said that a firm upon resignation of designated person, should make efforts to update address and contact details of such designated persons for one year after resignation and should preserve the data for five years. In case the designated person is a fiduciary or intermediary, the company shall maintain its name, permanent account number (PAN) or other unique identifier in its digital database. The fiduciary or intermediary,
in turn, shall maintain a list of persons and their PAN with whom they have shared the unpublished price sensitive information of the firm.
Instances of insider trading in India were first reported in the 1940s. Directors, agents, auditors and other officers of companies were found to be using inside information for profitably speculating in the securities of their own companies137. Thomas Committee had analysed these instances and observed that insider trading occurred due to (i) the possession of information by these people; (ii) before everybody else; (iii) regarding the changes in the economic condition of companies and more particularly, regarding the size of the dividends to be declare, or
of the issue of bonus shares or the impending conclusion of a favourable contract.
The president of the Bombay Stock Exchange, in his pre-independence speech on 14 June 1947, cited instances of leading companies not providing prompt public declaration of dividends and issue of bonus shares138. As a result,
in each and every case where the bonus and the right shares were issue, the information had leake out much prior to the official announcement. The reaping of unjust profits by ‘inspired’ operators on such occasions was very common.
“However, during the 1940s, this organized fraud did not receive the “public indignation” that it deserved. A reason could be the lack of awareness among the public that the profits made by the company’s directors and their friends are
extracted from the investing public’s share. The legislators while deliberating on the laws to curb these practices compared these ‘inspired operators’139 with thieves.”
Under the SEBI Act, Section 11(2) (g)158 empowered the SEBI to take such measures, inter alia, to prevent insider trading, to protect the interest of investors and to promote the development of and regulate the securities market. “The SEBI has been further empower to make regulations consistent with the SEBI Act under Section 30 of the
SEBI Act. Pursuant to such powers, the SEBI had framed the SEBI (Prohibition of Insider Trading in the Securities Market), Regulations, 1992 on 19 November, 1992 for prohibiting the offence of ‘insider trading.’ Thus,
the Insider Regulations were frame by SEBI seven (7) months after the Indian Parliament enact the SEBI Act”2
The first case where SEBI had initiated action against the violators of insider trading laws was the Hindustan Lever Case.
In this case, Hindustan Lever Limited (HLL) and Brooke Bond Lipton India Ltd (BBLIL) were subsidiaries of the common parent company, Unilever. A merger announcement between BBLIL and HLL was intimated to the stock exchanges on 19 April, 1996. SEBI was notified about the leakage of the merger information and insider trading by the market
as well as the media. Therefore, the SEBI had initiated investigations into the matter. SEBI found that HLL as an insider had purchased the securities of BBLIL from the Unit Trust of India (“UTI”) on the basis of the UPSI about the impending
merger, thereby violating the provisions of the Insider Trading Regulations and the SEBI Act.
As a result, UTI incurred losses. SEBI, in exercise of its power under Section 11B of the SEBI Act read with Regulation 11
of the Insider Regulations had directed the HLL to compensate the UTI to the extent the UTI had suffered losses. SEBI estimated the loss caused to the UTI on account of the insider trading at Rs.3.04 crores. The basis for this calculation
was the difference between the market price of the shares of BBLIL at which the shares were sell by UTI to HLL after the announcement of the merger and the price of the shares prior to the announcement of the merger,
excluding premiums. SEBI justified its action as corrective steps.
“UTI and HLL filed separate appeals against the SEBI’s order before the appellate authority, the central government168”.
Security Exchange Board of India in Prohibition To Insider Trading
The advent of the institution of stock exchange can be trace with the origin of join stock companies form the
organization which brought to the fore, the concept of negotiability of capital instruments coupled with the perpetual
existence of the artificial personal identity of the organizations. Records reveal that there existed a market for “dealing in stock of Amsterdam as far back as 1885
“The stock exchanges in India are regulate by the Securities and Exchange Board of India
(SEBI) established in 1992. The provisions of Securities Contracts (Regulation) Act, 1956, Companies Act,
1956 and the Depositories Act, 1996 are also applicable on the stock exchanges in India.”
SEBI is working hard to bring the trading procedure in Indian stock exchanges at par with global markets. The concept of on-line trading has heralded a new era in stock exchanges.
2 https://shodhganga.inflibnet.ac.in/bitstream/10603/122585/11/11_chapter%202.pdf
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