CII welcomes insider trading rules; cautions against burden

Noting that codes of conduct and compliance memos were specifically crafted to provide comprehensible guidance to employees, the Chamber said a general acknowledgement from an employee that he or she had read the code and understood it should be sufficient undertaking to avoid undue administrative burden.

On the issue of pre-clearance of trades, CII said not all employees in every firm would need to pre-clear trades and hence this should also be left to each firm to be decided.

While only those employees who may be privy to insider information should be required to pre-clear their trades, other conflicts could be caught in the monitoring of trades post-trade date, it said.

Monitoring of trades was part of the compliance department function, but it was also something that the business unit management had to do as they were best placed to spot conflicts, CII said.

On the need for confidentiality agreement, CII said requiring employees to sign it was neither necessary nor in accordance with the international standards.

An acknowledgement of the code of conduct was sufficient, it pointed out.

Regarding unpublished price sensitive information, CII suggested that it should be ensured that non-material events were not included in the definition, only unpublished price sensitive information and not all confidential information needed to be reported to the compliance department.

Companies should also be allowed to maintain confidential files with adequate protection, it added.

CII also suggested the international practice of putting securities on the grey list when the firm was associated with any material assignments for a client or was otherwise in possession of "material non-public information".

Abuse of rating change information was usually detected through front-running surveillance reports, it added. Securities that were being purchased or were being considered for purchase were not put on the grey list in most international firms, it said adding that employees who could take advantage of this information were restricted to trade by the pre-clearance process.