MUMBAI: Tuhin Kanta Pandey, chief of markets regulator Sebi, said that when it comes to compliance with insider trading regulations, listed banks have a twin responsibility: preventing unpublished price sensitive information (UPSI) leaks about the lender itself, and also relating to UPSI of listed companies they have banking relationships with.
He said that following insider trading regulations is the moral responsibility of banks’ management. He also asked bank chiefs to strengthen internal controls to detect and prevent such violations.
Pandey was speaking to MDs and CEOs of listed banks on the topic of “Strengthening Compliance with PIT Regulations in Listed Banks”. PIT refers to Prevention of Insider Trading, one of the main regulations framed by Sebi for market intermediaries and other related entities.
The Sebi chief’s address comes a few months after some top officials at IndusInd Bank, one of the leading private sector lenders, were alleged to have used UPSI to benefit themselves by selling stocks before negative news about accounting lapses was made public.
“Insider trading risks thrive where controls are weak – where processes are unclear, responsibilities are undefined, and oversight is inconsistent,” Sebi chief said in his address. He said that weak controls were one of the prime reasons behind many stock market-related frauds.
Pandey said that a robust internal control framework ensures accountability for every piece of UPSI, timely and accurate disclosures, and a clear understanding among employees of their responsibilities supported through clear written policies, codes of conduct, and periodic training.
Pandey said that banks should place the highest priority on safeguarding UPSI, which could be relating to the bank itself, or other listed companies that are customers of the bank. “Even casual or informal sharing in meetings or over e-mail should be considered a serious breach,” he said.
In today’s digitally connected world, a single leak can travel across networks in seconds, and there is no way to undo the damage to stock prices, to investor confidence, or to the bank’s reputation, the Sebi chief said. He also reminded the top bankers that compliance with the regulations was not just a legal obligation, but a moral responsibility.
Pandey also highlighted the role of the compliance officer under Sebi’s PIT Regulation. He emphasised boards of companies should ensure that the compliance officers are fully empowered with authority, training, tools, and clear backing from leadership to enforce regulations effectively. “Above all, never bypass the Compliance Officer’s oversight,” the Sebi chief said.
