New rules against insider trading will be brought out this year
The Securities and Exchange Board of India (SEBI), on Tuesday, urged the government to form a single regulator for companies taking deposits from the public in an illegal manner.
Stating this, SEBI chairman U. K. Sinha said that the regulator had launched investigations against such deposit-taking companies.
“We have asked the government for a new set of laws so as to have a single regulator for these sort of companies,” he said in response to a question on chit funds at an interactive session organised by the Confederation of Indian Industry (CII) –eastern region here.
He also pointed out that these deposit-taking firms were taking advantage of loopholes in existing laws. “We have also taken up with the government so that the loopholes are plugged” he said.
“In these sort of deposits, assurances are being given on doubling the money in four years and hefty commissions of 15 to 20 per cent are being paid to agents. I cannot think of any legitimate business doing this,” Mr. Sinha said.
“After some time they would not get any returns. They may also lose all their money It is a very worrying situation,” Mr Sinha said.
The capital market regulator is also planning to put in place new sets of regulation against insider trading and on share buyback.
Admitting that present regulations were very old, Mr. Sinha said that SEBI would come out with revised regulations on insider trading by this year. On share buyback, he said that it should be used to reward investors rather than to manipulate share prices.
“We got the impression that some companies were resorting to buyback of shares to manipulate the share prices and not for rewarding the investors,” he said, adding that comments have been received on a discussion paper prepared in this regard.
“We will bring out new buyback regulations to tighten the system”, Mr. Sinha said.
SEBI is also planning to introduce regulations for trading of bonds on the market, Mr. Sinha said, while exhorting corporate to raise money through debt. “The country’s corporate bond market was not very well-developed,” he noted.
Flagging some worrisome signs in the marketplace, Mr. Sinha pointed to the declining trend of corporates raising capital through the primary market. The figure has dropped from Rs. 67,000 crore in 2010-11 to Rs. 14,500 crore between April and February 2012-13.
Pointing out that the decline is substantial compared to the BRICS countries , he said that a worrisome signal was that corporates either allowed their applications to lapse, or withdrew their request for raising money.