SEBI Directs Banks to Reinforce Insider Trading Safeguards

In a recent address to managing directors and CEOs of listed banks, SEBI Chairperson Tuhin Kanta Pandey stressed that preventing insider trading is not merely a regulatory formality but a moral obligation. He highlighted that banks deal with two sets of sensitive data—material information about their own operations and unpublished price-sensitive information (UPSI) concerning clients—making robust safeguards indispensable.

Weak Controls Pose Risks

While India has strengthened its regulatory ecosystem over the years, Pandey cautioned that lapses often occur through casual sharing of UPSI via chats, calls, or emails. Such practices not only breach compliance but also risk eroding market trust and damaging institutional reputation.

Stronger Internal Systems Needed

SEBI has asked banks to establish well-documented policies, enforceable codes of conduct, and accountability structures to tighten oversight. Compliance officers, he said, should be empowered with the independence and tools necessary to enforce these rules effectively. Regular awareness programmes and employee training were also flagged as critical for reducing unintentional breaches.

Role of Technology in Surveillance

Pandey recommended that banks adopt technology-based solutions for record-keeping, surveillance, and data monitoring. Advanced systems can help track access to UPSI, flag unusual trades, and strengthen internal vigilance against misuse of confidential information.

Leadership Must Set the Tone

The SEBI chair underscored that boards and senior management must lead by example in ensuring compliance. Instilling a culture of discipline and accountability within banks, he said, is vital to protecting investor trust and maintaining the integrity of India’s financial markets.

SEBI’s message is clear—banks cannot afford to treat insider trading safeguards as optional. With greater emphasis on robust controls, empowered compliance frameworks, and board-level accountability, the regulator is pushing for stronger governance standards across India’s financial system.