ISLAMABAD - 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.