Compliance under SEBI Insider Trading Regulations

The Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations states that an insider shall not-

  • on his behalf or on behalf of any other person deal in securities or
  • communicate such information to any other person, who while in possession of such information shall not deal in securities.

“Insider means any person who, is or was connected with the company or is deemed to have been connected with the company, and who is reasonably expected to have access to unpublished price sensitive information in respect of securities of company, or who has received or has had access to such unpublished price sensitive information”

The requirements under the SEBI Insider Trading regulations are as follows:

  • The Company shall frame a code of internal procedures and conduct as near thereto the Model Code specified in Schedule I of the Regulations without diluting it in any manner and ensure compliance of the same.
  • The Company shall abide by the Code of Corporate Disclosure Practices as specified in Schedule II of the Regulations.
  • The Company shall adopt appropriate mechanisms and procedures to enforce the codes.

Initial Disclosures

  1. Disclosure of interest or holding by substantial shareholders: Any person who holds more than 5% shares or voting rights in any listed company shall disclose to the company [in Form A], the number of shares or voting rights held by such person, on becoming such holder, within 2 working days of:—
    • the receipt of intimation of allotment of shares; or
    • the acquisition of shares or voting rights, as the case may be
  2. Disclosure of interest or holding by directors and officers: Any person who is a director or officer of a listed company, shall disclose to the company [in Form B], the number of shares or voting rights held by such person and positions taken in derivatives by such person and his dependents, within 2 working days of becoming a director or officer of the company.
  3. Continual disclosure

  4. Substantial shareholder: Any person who holds more than 5% shares for voting rights in any listed company shall disclose to the company [in Form C]
    • the number of shares or voting rights held and
    • change in shareholding or voting rights, even if such change results in shareholding falling below 5%,

    if there has been change in such holdings from the last disclosure made as initial disclosure or continual disclosure and such change exceeds 2% of total shareholding or voting rights in the company.

  5. Directors and officers: Any person who is a director or officer of a listed company, shall disclose to the company [in Form D], the total number of shares or .voting rights held and change in shareholding or voting rights, if there has been a change in such holdings of such person and his dependents (as defined by the company) from the last disclosure, and the change exceeds Rs. 5 lakh in value or 25,000 shares or 1% of total shareholding or voting rights, whichever is lower.
  6. The disclosure mentioned under continual disclosure shall be made within 2 working days of:
    • the receipts of intimation of allotment of shares, or
    • the acquisition or sale of shares or voting rights, as the case may be.
  7. Disclosure by company to stock exchanges

  8. Every listed company, within two days of receipt, shall disclose to all stock exchanges on which the company is listed, the information received as initial and continual disclosures by substantial shareholders, directors and officers [in the respective formats specified in Schedule III of the Regulations]
  9. Trading window

  10. The company shall specify a trading period, to be called “trading window”, for trading in the company’s securities. The trading window shall be closed during the time the price sensitive information is unpublished. When the trading window is closed, the employees/directors shall not trade in the company’s securities in such period.
    All directors/officers/designated employees of the company shall conduct all their dealings in the securities of the Company only in a valid trading window and shall not deal in any transaction involving the purchase or sale of the company’s securities during the periods when trading window is closed or during any other period as may be specified by the Company from time to time
    The Company shall decide the date of commencement of ‘closing of trading window’ which shall be opened, 24 hours after the price sensitive information is made public.
    The trading window shall be, inter alia, closed at the time:—

    • Declaration of financial results (quarterly, half-yearly and annually).
    • Declaration of dividends (interim and final).
    • Issue of securities by way of public/rights/bonus etc.
    • Any major expansion plans or execution of new projects.
    • Amalgamation, mergers, takeovers and buy-back.
    • Disposal of whole or substantially whole of the undertaking.
    • Any changes in policies, plans or operations of the company.
  11. Pre-clearance of trades

  12. All directors/officers/designated employees of the company who intend to deal in the securities of the company (above a minimum threshold limit to be decided by the company) should pre-clear the transaction by making an application to the Compliance Officer providing the details as prescribed in the Model Code
  13. Reporting Requirements for transactions in securities

  14. All directors/officers/designated employees of the listed company shall be required to forward the following details of their securities transactions including the statement of dependent family members (as defined by the company in the Model Code) to the Compliance Officer:
    • all holdings in securities of that company by directors/officers/designated employees at the time of joining the company;
    • Periodic statement of any transactions in securities (the periodicity of reporting may be defined by the company. The company may also be free to decide whether reporting is required for trades where pre-clearance is also required); and
    • Annual statement of all holdings in securities.

Consequences of Non compliance

Liability under Sections 11, 11B, 11D, Chapter VIA and Section 24 of the Act.”

Leave a Reply

Your email address will not be published. Required fields are marked *