SEBI’s data sharing arrangement for insider trading investigations
SEBI has entered into a data sharing arrangement with Central Board of Direct Taxes (CBDT) to get more information in insider trading cases. This arrangement will help uncover the financial links between various entities involved in insider trading. Further, as part of the deal, SEBI will have quick and in some cases automatic access to income tax returns, tax audits, and high-value purchases and also the network identity of market participants suspected of violating rules.
The reason for such information sharing arrangement is that SEBI had come across information that people having no knowledge of equity or not connected to the stock market at all, were trading in shares before large institutions placed their orders. For instance, some trading in shares were traced to the farmers of Bihar and Jharkhand who had no knowledge of stock market. SEBI suspected that these farmers were used as a front and someone from the fund management team of the mutual fund actually benefited from these trades.
In this respect, SEBI’s investigation found people at various institutions with access to insider information. But, it failed to act, because of lack of evidence. Therefore, it is hoped, this pact will provide the required evidence and help SEBI to nab more culprits in insider trading cases.
