The Securities and
Exchange Commission of Pakistan has issued a notification under Section 15D of
the 1969 Securities and Exchange Ordinance read with section 40B of the 1997
Securities and Exchange Commission of Pakistan Act to specify the manner and
form for the disclosure of inside information by the listed companies and by
the persons discharging managerial responsibilities in listed companies.
The notification will result in clearly defining
the roles and responsibilities of the company as well as the person possessing
the information. It also describes the obligation of stock exchanges with
respect to dissemination of information so that no person takes undue advantage
of the inside information. Now the Commission will be in a better position to
prosecute the persons involved in insider trading as the presence of newly
introduced statutory obligation will restrain the persons alleged of insider
trading from citing legal justifications for their illegal acts in the presence
of clear requirements. It is pertinent to mention here that dissemination of
material information by the listed companies through the stock exchanges is
also a requirement of listing regulations.
The said provision of the 1969 ordinance states the
obligations of persons including listed companies, persons who possess inside
information, the persons discharging managerial responsibilities in listed
companies with respect to discloser of information and persons associated with
the persons discharging managerial responsibilities in a listed company. Accordingly, the SECP in line with
international practices and the existing provisions of the law, has approved a
consolidated statutory form to meet the requirements of Section 15D of the
ordinance, whereby, the Commission has specified the mode to disclose the
requisite information to Commission and the public (through the stock
exchanges).
Insider trading is the trading in the shares of a listed company
by insiders with access to non-public information about the company.
Information is "inside information" if it is price-sensitive and has
not been publicly disclosed. Generally, trading by corporate insiders such as
officers, key employees, directors, and large shareholders may be legal, if
this trading is done in a way that does not take advantage of non-public
information. The statutory requirements to disclose inside information are
central to the orderly operation and integrity of the stock market and underpin
the maintenance of a fair, transparent and informed market.
The notification has specified the minimum
standards with which listed companies and other aforementioned persons are
required to comply with respect to inside information. It is the obligation of
listed companies that the disclosure should be made in a manner that provides
for equal, timely and effective access by the public to the price-sensitive
information.
The notification issued by the apex regulator
states that all the listed companies as well as the persons specified above
shall immediately file with the Commission and communicate the same
simultaneously to the stock exchange(s) on which these are listed, the details
as to the inside information and ancillary matters in the Form annexed to this
notification upon the occurrence of any one or more of the events which may
affect the price of a listed security. The stock exchanges shall immediately
disseminate the material information and also ensure posting of same on their
website. Furthermore, for the purpose of Section 15D(4), listed companies or
persons acting on their behalf, shall maintain and regularly update the list of persons employed, under contract or otherwise, who
have access to inside information.
The notification
has been placed on the SECP’s website for the information of all stakeholders.
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