Background: – SEBI has vide Circular no. SEBI/LAD-NRO/GN/2020/23 dated 17th July 2020 and circular No. SEBI/HO/ISD/ISD/CIR/P/2020/135 dated 23rd July 2020, notified and amended certain regulations as well as certain clauses of the Schedules and Formats of the SEBI (Prohibition of Insider Trading) Regulations, 2015. (PIT Regulations).
SEBI, vide Circular No. SEBI/HO/ISD/ISD/CIR/P/2019/82 dated July 19, 2019, had specified the standard format for reporting of violations related to Code of Conduct (CoC). The said format has been suitably modified as per circular issued by SEBI on 23rd July 2020 (supersession of Circular No.SEBI/HO/ISD/ISD/CIR/P/2019/82 dated July 19, 2019). The listed companies, intermediaries and fiduciaries shall inform the violations of PIT Regulations relating to CoC as per the revised format (Annexure A, screenshot attached at the end of the table) to the Stock Exchange(s).
| S.No. | Regulations | Current Provision | Revised Provision | Remarks | ||||||||||
| 1 | Reg 3(1)(5)
{Communication or procurement of unpublished price sensitive information} |
Reg 3(1)(5):
The board of directors shall ensure that a structured digital database is maintained containing the names of such persons or entities as the case may be with whom information is shared under this regulation along with the Permanent Account Number or any other identifier authorized by law where Permanent Account Number is not available. Such databases shall be maintained with adequate internal controls and checks such as time stamping and audit trails to ensure non-tampering of the database. |
Reg 3(1)(5): Substituted
The board of directors or head(s) of the Organisation of every person required to handle unpublished price sensitive information shall ensure that a structured digital database is maintained containing the nature of unpublished price sensitive information and the names of such persons who have shared the information and also the names of such persons with whom information is shared under this regulation along with the Permanent Account Number or any other identifier authorized by law where Permanent Account Number is not available. Such database shall not be outsourced and shall be maintained internally with adequate internal controls and checks such as time stamping and audit trails to ensure non-tampering of the database.” After sub-regulation 5, the following shall be inserted (6), namely, – The board of directors or head(s) of the organisation of every person required to handle unpublished price sensitive information shall ensure that the structured digital database is preserved for a period of not less than eight years after completion of the relevant transactions and in the event of receipt of any information from the Board regarding any investigation or enforcement proceedings, the relevant information in the structured digital database shall be preserved till the completion of such proceedings.” |
Important changes:
> The requirement of maintaining structured digital database is extended to other entities i.e. Intermediaries or Fiduciaries with whom UPSI is shared. Now all such Intermediaries or Fiduciaries are also required to maintain a structured digital database, in addition to the listed Company. > The structured digital database is also to include following additional information i.e. the nature of unpublished price sensitive information and the names of such persons who have shared the information. > The structured digital database is now required to be maintained internally by the listed company/ intermediaries/ fiduciaries and same cannot be outsourced. > A new regulation 6 has been inserted to provide that the structured digital database is required to be maintained for a period of 8 years from the entry therein. However, if there is any investigation / enforcement proceedings by SEBI, then the relevant information is required to be maintained till completion of such proceedings, irrespective of the 8 year period. Impact: In database, the nature of unpublished price sensitive information not covered, same need to be modified. Need to change the preservation policy prescribing preservation period of 8 years for digital database. |
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2. |
Reg 7(2) Disclosures by certain persons |
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The above disclosures shall be made in such form and such manner as may be specified by the Board from time to time.”
Board prescribed the form C. |
Disclosure form and manner shall be the same as may be specified by the Board. | ||||||||||
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3. |
Minimum Standards for Code of Conduct [for Listed Companies] to Regulate, Monitor and Report Trading by [Designated Persons] |
Without prejudice to the power of the Board under the Act, the code of conduct shall stipulate the sanctions and disciplinary actions, including wage freeze, suspension, recovery, clawback etc., that may be imposed.
The code of conduct shall specify that in case it is observed by the [listed company] required to formulate a code of conduct under sub-regulation (1) of regulation 9, that there has been a violation of these regulations, It shall inform the Board promptly. |
Without prejudice to the power of the Board under the Act, the code of conduct shall stipulate the sanctions and disciplinary actions, including wage freeze, suspension, recovery, etc., that may be imposed, by the listed company required to formulate a code of conduct under sub regulation (1) of regulation 9, for the contravention of the code of conduct. Any amount collected under this clause shall be remitted to the Board for credit to the Investor Protection and Education Fund administered by the Board under the Act.”
The words “inform the Board promptly” shall be replaced by the words “promptly inform the stock exchange(s) where the concerned securities are traded, in such form and such manner as may be specified by the Board from time to time”. |
> Under this clause, in case of a violation by a Designated Person, if there is any amount collected by the Listed Company from such person, the Company is now required to remit the same to SEBI for credit to IPEF established by SEBI. Further, SEBI circular dated 23rd July 2020, given as per Regulation 4(2) of SEBI (Investor Protection and Education Fund) Regulations, 2009, such amounts shall be credited to the IPEF through the online mode or by way of a demand draft (DD) in favour of the Board (i.e. SEBI – IPEF) payable at Mumbai. The bank account details of SEBI – IPEF for online transfer is given below:
> The new clause provides that in case of any violation of the Code of Conduct, the Listed Company shall now promptly inform the Stock Exchanges. Impact: Need to amend the code and includes “Any amount collected under this clause shall be remitted to the Board for credit to the Investor Protection and Education Fund administered by the Board under the Act.” |
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