The code, however, does not apply to investments made in non-convertible bonds and debentures as these are fixed income instruments and devoid of any speculative interest.

Chairman DR Mehta told The Financial Express that the code is intended to tell the markets that Sebi is serious about bringing about greater discipline in the markets and that "charity begins at home". He added that now institutions, be it financial institutions, banks, mutual funds or corporates will take the cue and follow up with similar internal guidelines for its employees.

Giving an instance of how SEC of USA conducts itself, Mehta said: "Investments of Arthur Lewitt, current chairman of SEC, were immediately frozen after he assumed office." This, he added, was necessary to send the right message across to the markets in general.

Clarifying the objective of the code, Mehta said "It is not our intention to inconvenience our employees and disturb their existing investments. But any further investments will not be possible in equity/equity-related instruments. We do not want them to incur losses on their previous investments." But the code envisages full disclosure of investments already made. It states: "Any existing investment which is not in conformity with the above provisions should be declared within one month of the issue of this circular (which is dated August 28,2000).

Any sale of such existing investments should also be declared within 15 days of the sale." It is learnt from knowledgeable sources that restrictions on accepting jobs after retirement/resignation (on the lines of government servants who resign/retire from their jobs) are also likely to be imposed by Sebi in the near future.

The code of conduct, which has come into operation from August 28,2000 makes it mandatory for all employees of Sebi (including chairman, full time members on its board, senior executive directors, executive directors, officers, including those on deputation and contract and all other staff members) to desist from making "any direct or indirect investment in equity and equity-related instruments including convertible debentures and warrants except units of mutual funds."

The code amplifies that the "restrictions would apply to (a) investments of the employee; (b) investments of dependent children or other wards managed by the employee as a guardian; (c) investment made by spouse, dependent children, dependent parents and dependent parents-in-laws of the officer out of moneys received from the employee."

Sebi has already circulated its draft guidelines on insider trading last month. It was a sequel to deliberations of a working group, chaired by Kumar Mangalam Birla, had with market intermediaries. The discussions highlighted the need for "adequate internal procedures and guidelines for companies and other entities duly backed by a regulatory mandate".

Based on the feedback the regulator receives from corporates, institutions and market participants, Sebi is expected to prescribe procedures for establishing internal checks and balances to prevent insider trading and strengthen growth of companies and develop a healthy foundation for the capital markets, senior Sebi sources maintain.