SEBI to consider provisions for unexplained suspicious trading patterns

Similar to the provision in the Income Tax Act on “unexplained credits”, markets regulator SEBI would seek to consider provisions for “unexplained suspicious trading patterns”.

SEBI, while dealing with the matters related to contravention of the provisions of the securities laws, particularly relating to manipulative and unfair trade practices, insider trading, front running, pump and dump activity, etc., faces challenges in finding direct evidences in respect of communication of non-public price sensitive information.

In such cases, where the trading pattern clearly appears to be repeatedly suspicious, investors would be required to explain such trading activities.

Review of the definition of Unpublished Price Sensitive Information (UPSI) will also be conducted by SEBI.

The current definition of UPSI places the responsibility of categorising information as UPSI on the listed entities, with an expectation that they will exercise prudence while categorising information as UPSI and, thus, will comply, in spirit, with the principles laid under PIT Regulations.

However, it has been observed that, many a times, an information/event which should have been categorized as UPSI was not done so by the listed entity. Thus, in order to ensure that the process of categorisation of information as UPSI by listed companies is uniform and to align it with the disclosure requirements under the SEBI (LODR) Regulations, the definition of UPSI will be reviewed, SEBI said.

The markets regulator also plans to facilitate transparency around the conglomerate by enhancing the group-level reporting of transactions.

Disclosure of details of cross holding and material financial transactions within the conglomerates is also among the matters that SEBI would examine to be disclosed on an annual basis.

There is a need to identify, monitor and manage the risks introduced into the securities market ecosystem by unlisted companies in a conglomerate with a complex set of listed and unlisted associates, SEBI said.

While listed entities are subject to comprehensive disclosure requirements, the same levels of disclosure requirements are not applicable to unlisted companies.

In the ensuing year, SEBI plans to review the pricing mechanism in case of delisting.

In particular, review of the reverse book building process and exploring other alternatives to determine exit price in case of voluntary delisting would be undertaken.