| Sebi to clear milder version of draft insider trading norms |
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Mumbai, 9 November The Securities and Exchange Board of India (Sebi) is set to overhaul the insider trading norms, first framed two decades ago. The regulator is expected to approve the new norms at its board meeting on November 19. Sources in the know said the new rules would be far more stringent than the regulations currently in place but not as strict as those mentioned in the draft document circulated in December last year. For example, in the definition of "connected persons", public servants might not be specifically mentioned as insiders. Also, disclosing due-diligence procedures by companies to stock exchanges might not be part of the regulations. "In the final guidelines, the market regulator has taken into consideration the feedback received from various intermediaries. Their concerns have been ironed out," the sources said. The insider trading norms will define connected persons on the basis of the duty they perform for a company and the legal relation they have with the listed entity and its promoters. In the draft regulations formulated by the insider trading committee, led by judge N K Sodhi, a connected person was defined as someone connected with a company in any capacity (including people who had frequent communications with company officers) in the six months prior to the trade. The draft regulations had made headlines for their inclusion of public servants in the definition of connected persons. But in the final guidelines, public servants and ministers might not find a specific mention. "If public servant or the media act on any insider information, they will be examined. However, there would not be any specific provision to deal with them," said a source. In the draft regulations, any due-diligence that companies engaged in needed to be declared to stock exchanges two days before any trading activity was undertaken in the stock. But the final norms might not find mention of due-diligence aspects. "Dealing with situations where there is no intent to conduct a mala fide transaction needs clarity. Just declaring due-diligence two days before trade does not solve the problem and is not practical," said Raja Lahiri, partner, Grant Thornton. However, there is another section of market that believes any form of pricesensitive information should be available to all types of investors. "The due-diligence aspect is the heart and soul of the regulations. Every investor has the right to access the information, whether positive or negative, about a company" said J N Gupta, chief executive officer, SES proxy advisors. In December last year, the prohibition of insider trading (PIT) committee had given its report to the market regulator. Sebi later invited comments on the draft regulations. Turn to Page 4 >Board meets on November 19GOING SOFT | Connected persons defined on the basis of association and responsibility to a company | Connected persons include public servants | Due-diligence required to be declared to bourses 2 trading days before proposed trade New norms | Connected person is someone who is related to a firm in any capacity | No specific mention of public servants as connected persons | Due-diligence aspects will not be mentioned |
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| Sebi to clear milder... |
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Legal experts say persons with fiduciary duty to shareholders are supposed to put shareholders' interest ahead of their own and, thus, should be labelled as insiders. Gupta says it is difficult to pinpoint an insider and charge him or her for it. " Before charging an insider, it needs to be proved without a doubt that the person has acted on unpublished price- sensitive information," said Gupta. Sebi is also thinking about introducing a "trade plan" for companies that want to deal in their own shares. Under the plan, companies and promoters will be required to declare their intent of trading in their own shares and mandatorily conduct such trades six months later. Experts say trade plan will aid in removing the hassles companies earlier faced in trading in their securities. "India currently needs a mature structured way of trading as suggested in the trade plan. And, we believe a six- month time is a reasonable cool- off period for companies to execute trades in their own scrips," said Lahiri. |
| Govt eases green laws for biz push |
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The Union environment ministry has been working overtime ever since the National Democratic Alliance ( NDA) government came to power at the Centre, to ease the investment climate. The initiatives have made environmentalists wary but the industry is slowly securing changes that it had asked for. The Narendra Modi- led government has issued around 50 fresh guidelines easing conditions for industry in about six months, beside launching an online system for applying environment clearances. In short, it has set the ball rolling for ushering in industry- friendly reforms. The Bharatiya Janata Party ( BJP) often blamed the United Progressive Alliance ( UPA) regime for delay in projects, policy paralysis and stringent green norms, which it claimed, acted as a block to economic growth. Union Environment Minister Prakash Javadekar, while stating the ministrys 100 days' progress, had said, "We are doing what the UPA government didnt do." To deal with the power crisis that happened soon after it took charge, the government did away with the primary requirement of holding a public consultation in case of expansion of output for coal projects. The Union environment ministry also allowed group clearances for Coal India mines rather than examining individual project proposals in the vicinity. The government explained that these moves were a step towards enhancing coal production for boosting power supply in the country. The Centre has also been quick to react to changing circumstances. For instance, with the latest Supreme Court order, cancelling coal block allocations, the fate of more than 200 mines was left hanging, as it wasn't clear whether the companies would have to re- apply for green nod. However, the ministry has decided to transfer all existing environmental clearances of cancelled coal blocks to new allottees once the auction is completed. Changing clearance dynamics To increase transparency through Modi's e- governance model, MoEF has launched an online monitoring system for project developers. Thus, a project proponent will not have to visit the ministry office to apply for green clearance. Javadekar, in fact, once said, his ministry is not playing Office Office ( a satirical TV serial) anymore and has simplified the procedure of applying for environment and forest clearances. It gave yet another pro- industry signal and allowed project developers to be present at the Forest Advisory Committee meetings to present their case while their projects are appraised. Chandrajit Banerjee, director- general at Confederation of Indian Industry (CII), says, " Some of these changes can potentially reduce the delays in grant of clearances and we hope that the implementation of these changes will be fast and effective." The tinkering with norms, rules and regulations has its limit. The government has also established a highlevel commission to look into amending six green laws. The committee is expected to come up with its suggestions by November- end. No land hassle The Centre has relaxed all rules from aproject's primary phase to the last one. For instance, land acquisition used to be a big hindrance for any project developer and it used to take years to complete the process. After this, the file comes to the ministry for clearance. The Centre relaxed the rules by allowing project proponents to give proof of initiation of land acquisition instead of going for full acquisition, which included, in some cases, a letter of consent from the land owner. To facilitate easier land acquisition in forest areas, the government is also contemplating doing away with the need for consent of gram sabhas entirely. It has already done so for prospecting of minerals and some other activities such as linear projects. This, however, could have a negative impact, according to environment activist Aruna Chandrasekhar, Business and human rights researcher at Amnesty International India cautioned, "Some of the amended laws fall short of international standards on consultation and consent, and could further marginalise vulnerable communities who seldom have a voice in decisions taken around their lands and resources," she said. Easier public dealing Once a project developer acquires land, he sends relevant information about his proposal to set up a factory to the Centre. The first stage for green clearances starts with screening, which determines if a project requires further environmental studies for preparation of an Environment Impact Assessment. Environment study is a mandatory exercise, which takes into account all concerns and becomes the basis for a green nod. The government has curtailed powers of the expert committee and told them not to ask for additional studies to review sitespecific impacts of the projects on environment. After screening, public consultation is done with the locally affected people. A project developer convinces the stakeholders about the need to take away the land and about rehabilitation. However, in many cases, this process has been done away with, too. During appraisal of a project, the expert panel reviewing it, stipulates several conditions on the developers while giving the green nod. The non- fulfilment of these conditions might attract heavy penalty or even cancellation of the project. However, the government has made life easier for industries as it has told its Expert Appraisal Committee not to impose conditions " beyond the control" of the project proponent. The Centre has also moved towards decentralising the process of environment clearance. In wildlife areas, it has allowed project proponents to carry out preliminary surveys after securing the approval of the forest officer ( chief wildlife warden), instead of approaching the Centre, and, subsequently, seeking the nod of the National Board for Wildlife (NBWL). Similarly, the lower- level forest bureaucrats can give forest land to miners if the project is " temporary in nature" and does not require felling of trees. Commercial projects ( in and around wildlife sanctuaries, national parks and eco- sensitive zones) will need an environment clearance from the state environment impact assessment authority alone and a nod from the Centre under the Environment Protection Act, 1986, wont be required. A high- level commission set up to review six laws is expected to come up with suggestions by November- end |Around 50 fresh guidelines issued, easing conditions for industry |Online system for applying environment clearances launched |Primary requirement of holding public consultation in case of expansion of coal projects done away with |Project proponent will not have to visit ministry to apply for green clearance |Consent of gram sabhas done away with for prospecting of minerals |Process of environment clearance decentralised to authorise states and forest bureaucrats to give green nod in certain commercial and prospecting cases KEY DECISIONS |
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