SEBI Chair Calls For Stronger Compliance With Insider Trading Rules In Listed Banks

SEBI Chairperson Tuhin Kanta Pandey on Tuesday addressed managing directors and chief executives of listed banks, calling on them to strengthen compliance with the Prohibition of Insider Trading Regulations.

Pandey shed light on the unique position of banks under the regulatory framework, noting that unlike other listed companies, banks not only have to comply with disclosure and confidentiality norms but also hold unpublished price sensitive information (UPSI) about other listed firms in their role as fiduciaries.

Pandey gave examples where banks come into possession of UPSI. These instances included sanctioning large loans, debt restructuring, repayment negotiations, and while participating in committee of creditors proceedings in insolvency cases.

He said that if such information were to leak, even unintentionally, it could affect markets, impact shareholder wealth, and erode investor trust. He urged bank leadership to treat such fiduciary information with the same rigour as their own organisation's sensitive data.

Pandey referred to a KPMG study on corporate frauds in India, which found that weak controls were the prime reason for frauds.

He said insider trading risks thrive where processes are unclear. SEBI, he said, requires listed entities to establish robust, auditable, and transparent control systems. This includes a code of conduct for prevention of insider trading.

Pandey stressed that all UPSI must be handled strictly on a need-to-know basis and that informal sharing, even casually, should be treated as a breach. He said the Structured Digital Database (SDD) is central to compliance, as it records all sharing of UPSI in a secure, tamper-proof and time-stamped manner.

For banks, two SDDs are required—one for their own UPSI and another for UPSI held in a fiduciary capacity for other listed companies. He warned that SEBI has zero tolerance for non-compliance with SDD requirements.

Pandey also pointed to the role of technology in easing compliance. He said SEBI had already asked market infrastructure institutions to restrict trading by designated persons and their relatives during trading window closures linked to financial results.

He suggested that further technology solutions could be developed for UPSIs not yet covered by the automated system.