Sebi plans code for exchange directors, staff

Sebi plans code for exchange directors, staff
ENS ECONOMIC BUREAU

MUMBAI, JAN 12: With rampant insider trading and price manipulation becoming the order of the day, the Securities and Exchange Board of India (Sebi) has decided to formulate a code of ethics for the stock exchange directors and key functionaries to improve disclosure and transparency standards.

"There is no common code of ethics for the stock market directors, including president and key functionaries now. This would be discussed at the exchange representatives meeting on January 17," Sebi senior executive director L K Singhvi told newsmen after Sebi's interactive market surveillance committee meeting here.

"In many stock exchanges, officials (including the president) take advantage of their positions and get privileged information. They use this information to buy and sell shares and make huge profits," said a market source, adding, "this practice should be stopped."

The code would have provisions for disclosing information about trade transactions above certain value, he said adding few exchanges have provisions in bylaws governing disclosures by directors. Some members at the surveillance committee meeting felt that the stock exchanges president should refrain from trading on their own accounts while they are holding the post, he said.

He said some members opined that elected directors including president should disclose their beneficial interest before they take charge of the post.

Meanwhile, stock exchanges will now have to maintain trade transactions data for seven years for conducting audits, Singhvi said. "Some exchanges keep data on the trade and orders for six months. There is need for common practice across the exchanges and hence they will require to keep data for a seven year period," Singhvi said.

He said even the brokers would be required to maintain the client indentification information for seven years. Representatives of the exchanges also agreed to increase the staff strength for market surveillance function to follow up the stock alerts, he said.

The surveillance manual would be prepared for staff to standardise processes and improve effectiveness, he added. Bourses have also agreed to link the stock alert system of the exchanges with the proposed automatic filling and retrieval system of Sebi, he said.

Surveillance staff from various exchanges would meet monthly to exchange information, Singhvi said adding this would help to investigate cases which have large market implications.

The exchanges would review the 200 scrip price band list every quarter and decide on relaxing the price band in case trading volumes rise when an open offer is made to acquire a company, he said.