Securities regulations in India vis-a-vis buyback of shares is largely the same as those in Hong Kong. Both do not permit reissue of the shares bought back. It was on the recommendation of Sebi that the government decided not to allow buyback for treasury purpose.

But Hong Kong is now considering the possibility of allowing `treasury shares'. These shares refer to issued shares in a company which are repurchased and held by or on behalf of the company without being cancelled. The Securities and Futures Commission of Hong Kong has circulated a consultation paper to allow companies to reissue such shares. After six years of experience of buyback (introduced in 1992), the market regulator in Hong feels the need to allow companies this flexibility.

The arguments in favour of treasury shares is that the facility allows flexibility to companies to reissue shares when market conditions improve. Besides, this will give companies the flexibility to adjust their sharecapital more quickly, reduce the overall cost of capital and stimulate investment. More, it has also been argued that companies can view this as an investment opportunity, thus boosting returns to their shareholders. On the negative side is the fear of price manipulation and insider trading.

Insider-trading victims get money back

Talking of insider trading, it might be interesting to point out a recent case in the US where investors who fell victims to such a practice are getting back their money. The insider trading case itself is as old as 1992. After six years, justice is being done to the aggrieved investors.Recently, the Securities and Exchange Commission of the US has notified that investors who had sold common stock issued by Sun Electric Corp or Heekin Can Corp during late 1992 are entitled to receive a portion of the insider trading profits that have been turned over to a court-appointed receiver as a result of two commission enforcement actions.

The insider trading profits will bedistributed to investors who were net sellers on specific dates in the notified by the Securities and Exchange Commission.