In a written submission to the government, the SEBI has said the existing provisions are not adequate especially in the areas of penalties to tackle insider trading. ``The monetary penalties are to the maximum of only Rs 5 lakhs, which is highly inadequate,'' the SEBI has said.The SEBI plea for more powers stems from the fact that it has failed to prosecute multinational, HLL in a highly publised insider trading case.

In fact, the SEBI has successfully investigated and even prosecuted HLL and its directors, but the company made an appeal to the appellate authority in the finance ministry which ruled in the multinational's favour. ``The powers of issuing guidelines for disgorgement of undue gains or issuing directions to compensate for undue losses of investors also need to be made specific,'' it said.Besides, the SEBI said the regulations also need to provide for burden of proof being on the insider in respect of certain nature of transactions as is the case in securities regulations of developed markets like the US.``The insider trading regulations require fine tuning in some other provisions also,'' the SEBI said.

The data on case investigated by the SEBI is also pathetic. Since 1994-95, the regulatory body has investigated only nine cases for insider trading. Of this, in fiscal 1997-98, it has investigated five cases including the HLL case.The SEBI has already made a representation to finance committee of the Parliament on this issue, highlighting the need for more for itself. It says that in order to curb the menace of insider trading, now surveillance mechanisms have been improved and stock exchanges have set up dedicated surveillance departments to monitor price and volume movements.

The Stock Watch system is also being developed which would provide for detection of possible insider trading cases as the system would generate alerts on abnormal trades prior to important events.

The SEBI says besides the investigation of insider trading cases being strengthened, compliance officers are being designated by companies under the advice of SEBI who could be contacted by the exchanges to verify any rumours. This would also help to prevent misuse of information.

Interestingly, according to SEBI's own data, none of the SEBI's measures have helped to curb insider trading in the stock exchanges. According to SEBI, till date none of the Indian stock exchanges have reported any case of insider trading. This is despite the fact that scrips show volatile movements prior to any major announcement. For example, the Merind scrip has gone up before Wockhardt announced takeover of the erstwhile Tata firm.

Similarly, Raymond's scrip witnessed hectic activity before the company announced its joint evnture with Thyssen Steel of Europe.