Sebi proposal seeks info on live-in relationships
Insider trading provision proposes disclosure of details like home address
Anew proposal on insider trading requires people to disclose details of their live-in partners to their company.
A report dealing with fair market practices has proposed “disclosure of close personal relationships” along with other information to make it easier to crack such cases.
“… in order to facilitate investigation, the committee has recommended mandating disclosures by designated persons of …persons residing at the same address for more than one year,” said a recent Securities and Exchange Board of India (Sebi) report of the committee on fair market conduct chaired by TK Viswanathan.
Insider trading is when people look to make illegal profits by trading in shares on the basis of non-public information about a company.
However, bringing such instances to book has been challenging because of the difficulty in establishing a link between the people who had access to such information, and those trading on it, according to the report.
It has, therefore, been proposed that persons with access to such information make a disclosure of the names of immediate relatives, persons with whom they share a material financial relationship, as well Report suggests new provision on insider trading
Seeks disclosure of those sharing same address Essentially, it would mean disclosure of live-in partner’s details to the employer
as those sharing the same address.
“This is somewhat excessive and a certain breach of privacy. When combined with phone tapping powers, this is a sure recipe for excess power without any accountability,” said Sandeep Parekh, founder of Finsec Law Advisors, and former Sebi executive director. The committee report had also recommended phone-tapping powers for the regulator.
“….A blanket attempt to extend the boundary of insider trading parameters to persons living in the same home needs to be thought through,” said Data to be maintained in searchable electronic format
To be made available to regulator when required Would apply to employees with sensitive information Overreach into individual privacy, say lawyers
Sumit Agrawal, Founder, RegStreet Law Advisors and an ex-Sebi official.
Others sharing the same address could include spouses, children, other relatives, domestic help in addition to live-in partners. The company is required to maintain the information in a searchable electronic format which can be shared with Sebi when required for investigations.
A developed market like the US requires such disclosures only when a case is being investigated, and not otherwise.
“In the US, Rule 10b5 enumerates a non-exclusive list of non-business relationships under which a sufficient duty of trust or confidence will exist and a live-in or a romantic relationship is not included but can be asked about in a specific investigation by the regulator,” said Agrawal.
This is despite an instance where a romantic live-in partner’s inside information was used to make illegal gains. Toby Scammell made insider bets on Walt Disney Company purchasing Marvel Entertainment for a windfall gain based on information he gleaned from his live-in girlfriend who happened to be working on the deal.
The move comes even as debates on privacy have gained momentum in recent times. The Supreme Court ruled privacy to be a fundamental right in an August 2017 judgment. Another ruling over privacy in relation to the governments unique identification projectAadhaar-is still pending.
One lawyer also pointed out that such a database would be especially intrusive for people in same-sex relationships.
There is evidence of the lesbian, gay, bisexual and transgender (LGBT) community in India facing discrimination in terms of employment, health care, education and access to social services. This is according to a October 2014 World Bank report entitled ‘ The Economic Cost of Stigma and the Exclusion of LGBT People: A Case Study of India’ authored by MV Lee Badgett, professor of economics at the University of Massachusetts Amherst, Williams Institute Mandatory disclosure may reveal such relationships as an ‘unintended consequence,’ the lawyer said.