Closer watch on company insiders
Using inside information to enrich themselves while duping investors will become harder for executives of Barbadian financial institutions and investment companies.
Concerned that if left unchecked, improper trading by these individuals would “undermines investor confidence in the fairness and integrity of the securities markets”, the Financial Services Commission is moving to control the potential problem by introducing special regulations.
But the state entity has not stopped there and has also outlined its intention to implement other rules to govern the conduct of mutual fund administrators, and people involving in the trading of stock and other instruments in companies not listed on the Barbados Stock Exchange.
“The commission is mindful that the Barbados Stock Exchange Inc. in its role as a self-regulatory organisation has issued recommendations, for example, insider trading recommendations and corporate governance recommendations applicable to listed public companies,” the FSC said in its consultation document on the matter.
“The commission has sought to avoid duplication for the listed public companies while ensuring consistency in the requirements and standards for all public companies.” It also announced its intention to “issue additional guidelines for consultation during 2013 for funds and public companies”.
One of the areas of concern the regulator zeroed in on was insider trading, where the officers, directors and other people involved with companies use information not available to the public to buy shares and perform other transactions.
The FSC said its rules in this regard were intended to “establish a requirement for reporting issuers to put policies and procedures in place to address insider trading activities”, and “assist reporting issuers in understanding their obligations as it relates to insiders’ holdings and transactions in securities of public companies”.
They were also to “promote consistency in disclosures to ensure that reporting issuers understand and enforce the obligations of insiders, including their obligations to report ownership of, and transactions in, securities of public companies, both listed and unlisted”.
“The insider reporting requirements outlined herein are intended to inter alia, deter improper trading by insiders, that is, trading based on material undisclosed information. They are also designed to improve market efficiency by ensuring that investors are provided with information concerning the trading activities of insiders of an issuer in a timely manner, thereby enabling investors to make inferences into an insider’s views of a reporting issuer’s prospects,” it explained
It said when introduced, the rules would apply to “all unlisted public companies registered as reporting issuers with the commission”. The FSC will also mandate companies involved in investments, including securities and mutual funds to “develop policies and procedures related to insider trading which must include among other things provisions related to transactions planned prior to the acquisition of material information”. (SC)