FRANCISTOWN - As the Botswana Stock Exchange (BSE) continues to grow, so is the accompanying risk emanating from situations whereby people deal illegally in shares, a situation that can undermine investor confidence in terms of the fairness and the integrity of the stock market.

However, the stock exchanges listing and trading manager, Ms Bopelokgale Soko said as an institution that is part of a business whose greatest currency is reputation, the BSE takes this situation, which is called insider trading, very seriously and does act immediately and appropriately to nip any sign of illegality in shares trading in the bud.

As part of the effort to ensure that the public can invest in public companies with confidence, the BSE, with effect from April 2008, established the Code of Corporate Governance for listed companies, she told BOPA.

Ms Soko said all listed companies adhere to this code.

Since our regulations are disclosure based, those listed companies that fail to comply with the code or any of the BSE regulations are also obligated to disclose the circumstances that make them fail to conform, she explained.

Ms Soko said insider trading is a criminal act which benefits the perpetrators unfairly to the detriment of other shareholders.

For example, she said a person with inside information can decide to sell all his shares in a listed company when he knows that the company will be wound up in three weeks time. This will be unfair to the rest of the other shareholders whose shares shall be worthless in three weeks time.

Another example is that of a person who might buy shares of a listed company after learning privately from the company that they are about to secure a billion Pula contract from government, noted Ms Soko.

By the time this information is publicised, he will benefit from the increase in price having bought at a low price when everybody didnt know about this new development.

Ms Soko nonetheless said the BSE has not had any such cases to date, but they continue to be alert to the possibilities and are taking all steps to limit such occurrence.

Insider trading is when insiders (employees and board members) trade based on their knowledge of material corporate developments that have not been publicly announced.

Listed companies normally report to the BSE when they start their close periods. This is the time when people who have inside information are not supposed to trade their shares of the company or to discuss with outsiders.

Even though the current BSE Listings Requirements do not categorically regulate insider trading, Ms Soko said they mandate listed companies to disclose all price sensitive information with a view to controlling this practice.

These rules are currently under review and the new requirements shall more specifically deal with this matter. However, Section 324 of the Companies Act outlaws insider trading. Section 143 of the companies Act regulates disclosure of share dealings by the directors of companies. BOPA