Sebi chief urges listed banks to strengthen insider trading norms

Sebi chairman Tuhin Kanta Pandey on Wednesday urged managing directors and CEOs of listed banks to strengthen compliance with insider trading regulations. Emphasizing the importance of fair and transparent market practices, he called on top bank executives to ensure that all internal controls and reporting mechanisms are robust, reducing the risk of misuse of sensitive information.

“SEBI explicitly places responsibility on the Board of Directors, Managing Directors, and Compliance Officers to ensure compliance with PIT Regulations,” he added.

This comes against the backdrop of Sebi issuing an interim order in June against several senior executives of IndusInd Bank for allegedly breaching insider trading rules. The regulator found that some top officials, including the MD & CEO and deputy CEO, reportedly traded the bank’s shares while having access to unpublished price-sensitive information concerning irregularities in the derivative portfolio’s account balances.

He said that when a small group of people has access to information before the rest of the market and uses it for personal gain, it creates an uneven playing field. “Investors lose confidence, market fairness erodes, and the very integrity of the financial system comes into question.”

Pandey highlighted the dual responsibility of listed banks. Unlike other corporations, banks not only have to comply as listed entities but also hold sensitive information about other companies in a fiduciary capacity.

He explained that when banks sanction major loans, restructure debt, or participate in creditor committees, they often receive unpublished price-sensitive information (UPSI). If leaked, even unintentionally, such information could move markets, impact shareholder wealth, and damage trust.

“This is why your role as Managing Directors is not limited to overseeing your bank’s own compliance. It extends to ensuring that information about other companies, which you hold as fiduciaries, is protected with the same rigor and confidentiality as your own organization’s sensitive data,” the SEBI chairman said.

He also cited a KPMG study showing that weak controls were the primary reason for frauds, with most detected through whistleblowers or management reviews. According to him, strong internal control frameworks are needed to ensure every piece of UPSI is accounted for, every disclosure is timely, and every employee is aware of their responsibilities.

The SEBI chairman emphasized that these internal controls are not just about compliance. “They are about building a culture of integrity — where employees at all levels understand that confidentiality, ethical conduct, and accountability are nonnegotiable.”

He also stressed the importance of the structured digital database (SDD). For banks, this means maintaining two sets of SDDs: one for their own information and one for fiduciary information of other companies. This auditable trail, he said, is the best defense when regulators seek accountability. SEBI’s stance is uncompromising — non-compliance with SDD requirements will not be tolerated.