Covid creates new class of insiders

Mumbai: Before the Covid-19 outbreak, sensitive, potentially stock-moving board meeting decisions were known only to attendees and a select few in a company. Now, that tech support guy who the chairman won’t recognise may have an inside line on the board’s critical calls – thanks to all director meetings happening over video conferencing.

Office IT departments have access to content of video meetings run on company infrastructure. And companies are waking up to this, asking their IT employees to comply with insider trading prevention rules.

A leading paint company recently asked 35 employees from its IT team to disclose market investments made by them and their immediate family members.

“Our compliance team indicated that IT department employees who have access to sensitive information need to be treated as designated persons under insider trading rules,” said an official of the company. “It’s not just price sensitive information, during our internal meetings we also tend to discuss our vendors, suppliers, which themselves are listed companies.”

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Earlier, in most companies, only a few IT employees who took care of top company officials’ computers were in the designated persons list.

A Maharashtra-based fast moving consumer goods company has sent a precautionary email to its IT team, warning them not to discuss anything they have heard in board meetings with outsiders.

“This is something new for both the management and the IT department employees. So, we are trying to create an awareness in the department about dos and don’ts while possessing price sensitive information,” said a board member of the company.

As per Securities and Exchange Board of India’s insider trading rules, every company needs to maintain a database of its employees and third-party vendors who may be in possession of unpublished price sensitive information (UPSI).

People included in the list are called designated persons and they are subject to several compliance requirements.

Immediate Relatives Under Purview

To begin with, they are not allowed to buy or sell the company’s stock while in possession of any insider information. Also, they are required to make disclosures on their investments.

Legal experts say insider trading rules apply not just to these employees but even to their immediate relatives and to anyone such an employee has significant financial dealings with. “Listed companies will have to revisit their definition of designated persons considering the fact that new set of people including employees from IT department may now have access to UPSI,” said Tomu Francis, partner, Khaitan & Co.

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