Confederation of Indian Industry (CII), while welcoming SEBI’s initiative in setting up an administrative framework of procedures and guidelines for preventing ‘insider trading’ said that the procedures should avoid undue administrative burden on the companies. CII acknowledged that the prohibitions against insider trading play an essential role in maintaining the fairness, health, and integrity of the capital markets. In fact it has been recognized that the fundamental unfairness of insider trading harms not only individual investors, but also the very foundations of our markets, by undermining investor confidence in the integrity of the markets.

CII however emphasized that the procedures should be suggestive in nature, giving a broad framework of what is expected. It should be up to the individual company to assess its needs and to come up with detailed policies and procedures tailored to its business, company structure and unique circumstances.

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CII stressed that a company's code of conduct or compliance memos should set forth the salient points of the SEBI (insider trading) regulations and it is not necessary to give employees actual copies of the law. Employees may not be able to understand what is expected of them from a reading of the regulations. However, codes of conduct and compliance memos are specifically crafted to provide comprehensible guidance to employees. A general acknowledgement from an employee that he or she has read the code of conduct and understood it, should be a sufficient undertaking by the employee as to his or her understanding of the SEBI (insider trading) regulations. This would avoid undue administrative burden, according to CII.

CII has stated that the compliance department should be responsible for setting forth policies and procedures for the preservation of confidentiality of information and to monitor adherence to the rules regarding thereto as far as possible.

As it is conceptually impossible for anyone other than the person who possesses the confidential information to be responsible for maintaining its confidentiality, CII said that it should be the responsibility of each employee of the firm to maintain the confidentiality of such information. CII pointed out that it is also important that supervisory personnel in the respective business units/departments pre-clear employees trades along with the compliance officer as it is the respective supervisors, and not compliance, who are best placed to know what information individual employees are privy to. Monitoring of trades is part of the compliance department function, but it is also something that the business unit management must do as they are best placed to spot conflicts.
On the need for a confidentiality agreement CII, said that requiring employees to sign a confidentiality agreement is not necessary and is not in accordance with international standards. An acknowledgement of the code of conduct is considered sufficient and to require a confidential agreement would unduly add to the administrative burden of the compliance department.

On unpublished price sensitive information, CII has suggested that it should be ensured that non-material events are not included in the definition. It should also be ensured that only unpublished price sensitive information, and not all confidential information, needs to be reported to the compliance department, which is in accord with international standards. Companies should also be allowed to maintain confidential files with adequate protection, according to CII.

CII has also said that the international practice of allocating securities in the gray list, when the firm is associated with any material assignments for a client or is otherwise in possession of material non-public information as abuse of rating change information is usually detected through front-running surveillance reports.

Securities that are being purchased or are being considered for purchase are not put on the gray list in most international firms. Employees in that business unit who can take advantage of this information are restricted to trade in the said securities by the pre-clearance process. Alternatively, front-running surveillance reports would detect such trading. Bureau Report