Sssshhhh... SEBI casting its net on the Insider trader!!

New regulations being put in place by SEBI to silence the noiseless Insider Trading which is rampant in bourses

Indian bourses are not unfamiliar territories for insider trading. There has been an unstated assessment which holds weightage which mentions that movement in stock prices are substantially driven through such information. When the Rajat Gupta, the ousted director of Goldman Sachs was convicted of insider trading, this spectre of illegal handling of price sensitive information for the benefit of select individuals was splashed on global scale. 

India which had its own share of insider trading woes and recently the capital market watchdog, SEBI, is raising its defenses against possible breach of its security cover from wily market participants who might be sniffing at opportunities to circumvent rules and benefit from insider trading. It plans to bring even bureaucrats and judges into the ambit of its net. The idea of SEBI is to bring anyone who has access to price sensitive information which is not in the public domain to be brought into the net of regulations.

The idea is welcome for participants who would want to see Indian markets come clean and transparent in order to drive larger retail participation in the market.

Some of the issues that are worth pondering in such matters are:

• What teeth does the market watchdog (SEBI) and other agencies like Serious Fraud Investigation office and Economic Offences Wing who are mandated to keep the market clean have to implemented such rules and book the fraudsters?
• Do Indian agencies have the expertise and tracking system which could stand the test of Indian legal system when individuals and groups accused for Insider Trading are brought for trial?
• Do the investigating agencies have the track record to present a credible case against defaulters so that they are booked for their acts?

The current record of SEBI and other agencies are not worth speaking about. So, even though the capital market regulator may have its heart in the right place, it remains to be seen whether it can ensure the last mile implementation of its regulation. It has to work extra mile to ensure that regulations do not remain just text-book pieces of legislation meant for mere academic discussions.