Curbs on buying own co shares before results
This step has been taken by the regulator to stop the practice of executives using inside information to trade in the markets
The rules of trading in the shares of the company have now become stricter for the executives holding important positions in companies listed on the stock market. Capital markets regulator SEBI has decided to freeze the PAN numbers of all key executives of listed companies from the end of every quarter till 48 hours after declaratiojn of results. Earlier this rule was applicable only for Sensex and Nifty-50 companies. But now all the companies listed in the stock market have come under its purview.
SEBI has taken this decision to stop insider trading. Insider trading means such a trade, in which with the help of important information related to a company, an executive of the company takes undue financial advantage. To prevent this malpractice, SEBI has prepared trading window closure framework after the release of financial results of the company.
In this framework, the PAN numbers of top executives and employees associated with the management of the company are frozen. So that officers and employees cannot do insider trading by taking advantage of the financial results.
Such pople have deep knowledge about the company and can trade on the basis of this information of the company and can also earn huge profits. Also, they can share this information with their relatives who can also benefit from the insider information. SEBI has taken this step to stop this practice.
Till March 2023, 5,225 companies wer listed on BSE and 2,138 on NSE. It is believed that this new rule of SEBI will curb insider trading to a great extent.
In August 2022, SEBI prepared a framework. As per this framework, there was a plan to stop trading by designated persons by freezing the PAN during the period of closure of the trading window. This framework was first implemented for listed companies that were part of Nifty 50 and Sensex.