CS Kiran Mukadam
SEBI (PROHIBITION OF INSIDER TRADING) REGULATIONS, 1992
SEBI (PROHIBITION OF INSIDER TRADING) REGULATIONS, 1992
|1||Compliance officer||“compliance officer” meansa) any senior officer, designated so and reporting to the board of directors or head of the organization in case board is not there,b) who is financially literate and is capable of appreciating requirements for legal and regulatory compliance under these regulations
c) who shall be responsible for compliance of policies, procedures, maintenance of records, monitoring adherence to the rules for the preservation of unpublished price sensitive information, monitoring of trades and the implementation of the codes specified in these regulations under the overall supervision of the board of directors of the listed company or the head of an organization, as the case may be;
|No such definition|
|2||Connected Person & Deemed to||Connected Persons and Deemed to connected Persons includes-a) Directorb) occupies the position as an officer or an employee of the company or holds a position involving a professional or business relationship between himself and the company on temporary or permanent, that allows him, directly or indirectly, access to unpublished price sensitive information
c) an immediate relative of connected persons above
d) a holding company or associate company or subsidiary company; or
e) Broker /Sub broker/RTA or an employee or director thereof; or
f) an investment company, trustee company, asset management company or an employee or director thereof; or
g) an official of a stock exchange or of clearing house or corporation; or
h) a member of board of trustees of a mutual fund or a member of the board of directors of the asset management company of a mutual fund or is an employee thereof; or
i) a member of the board of directors or an employee, of a public financial institution; or
j) an official or an employee of a self-regulatory organization recognised or authorized by the Board; or
k) a banker of the company; or
l) A concern, firm, trust, Hindu undivided family, company or association of persons wherein a director of a company or his immediate relative or banker of the company, has more than ten per cent. of the holding or interest;
This definition is intended to bring into its ambit persons who may not seemingly occupy any position in a company but are in regular touch with the company and its officers and are involved in the know of the company’s operations.
|Connected Persons and Deemed to connected Persons includes-a) Directorb) occupies the position as an officer or an employee of the company or holds a position involving a professional or business relationship between himself and the company on temporary or permanent
c) is a company under the same management or group, or any subsidiary company u/s370 / 372 of the Companies Act 1956
d) Broker/Sub-broker merchant banker, share transfer agent, registrar to an issue, debenture trustee, broker, portfolio manager, Investment Advisor, sub-broker, Investment Company or an employee thereof, or is member of the Board of Trustees of a mutual fund or a member of the Board of Directors of the Asset Management Company of a mutual fund or is an employee thereof who have a fiduciary relationship with the company
e) is an official or an employee of a Self-regulatory Organisation recognised or authorised by the Board of a regulatory body
f) is a banker of the company
g) Relative of above
h) Persons mentioned in (d) holds more than 10 % shares in firm, trust, Hindu undivided family, company or association of persons
|3||Trading||“trading” means and includes subscribing, buying, selling, dealing, or agreeing tosubscribe, buy, sell, deal in any securities, and “trade” shall be construed accordingly||dealing in securities” means an act of subscribing, buying, selling or agreeing to subscribe, buy, sell or deal in any securities by any person either as principal or agent|
|4||Insider||“insider” means any person who is:i) a connected person; orii) in possession of or having access to unpublished price sensitive information;
This is intended to bring within its reach any person who is in receipt of or has access to unpublished price sensitive information.
|Insider includes-a) is or was connected with the company or is deemed to have been connected with the company and have access to unpublished price sensitive information in respect of securities of company,b) has received or has had access to such unpublished price sensitive information|
|5||Price Sensitive Information (PSI)||PSI includes-a) financial results;b) dividends;
c) change in capital structure;
d) mergers, de-mergers, acquisitions, delisting, disposals and expansion of business and such other transactions;
e) changes in key managerial personnel; and
f) Material events in accordance with clause 36 of the listing agreement.
It is intended that information relating to a company or securities, that is not generally available would be unpublished price sensitive information. Such PSI affects on price of the securities
|PSI includes-a) periodical financial results of the company;b) intended declaration of dividends (both interim and final);
c) issue of securities or buy-back of securities;
d) any major expansion plans or execution of new projects.
e) amalgamation, mergers or takeovers;
f) disposal of the whole or substantial part of the undertaking;
g) significant changes in policies, plans or operations of the company
|6||Relative||“immediate relative” means a spouse of a person, and includes parent, sibling, andchild of such person or of the spouse, any of whom is either dependent financially onsuch person, or consults such person in taking decisions relating to trading in securities||“relative” means a person, as defined in section 6 of the Companies Act, 1956|
|7||Communication or procurement of unpublished price sensitive information||Insider shall nota) communicate, provide, or allow access to any unpublished PSI , relating to a company or securities listed or proposed to be listed, to any person including other insidersb) procure from or cause the communication by any insider of unpublished PSI relating to a company or securities
c) Unpublished PSI may be communicated, provided, allowed access to or procured, in connection with a transaction that would entail an obligation to make an open offer under the takeover regulations where the board of directors of the company is of informed opinion that the proposed transaction is in the best interests of the company. In such cases, the board of directors shall require the parties to execute agreements to contract confidentiality and non-disclosure obligations
d) trade in securities that are listed or proposed to be listed on a stock exchange when in possession of unpublished PSI
|Insider shall not-a) his own behalf or on behalf of any other person, deal in securities of a company, if he have any unpublished PSIb) communicate/ counsel or procure directly or indirectly any unpublished PSI to any person who deal in securities, while in possession of such unpublished PSI
c) Company shall deal in the securities of another company or associate of that other company while in possession of any unpublished PSI
|8||Trading Plans||a) An insider shall be entitled to formulate a trading plan and present it to the compliance officer for approval and public disclosure pursuant to which trades may be carried out on his behalf in accordance with such planb) This provision would enable the formulation of a trading plan by an insider to enable him to plan for trades to be executed in futurec) Trading plan shall not entail commencement of trading on behalf of the insider earlier than six months from the public disclosure of the plan
d) Insider shall not execute trading plan between second trading day after the disclosure of such financial results and before 20th day of prior to last day of financial period. For ex. For Quarter 4 [Jan to March] financial result and result announcement date is 28th May, then Insider cannot execute his trading plan between 20th March to 29th May
e) Trading plan should be for 12 months
f) not entail overlap of any period for which another trading plan is already in existence
g) The trading plan may set out the value of securities or the number of securities to be invested or divested. Specific dates or specific time intervals may be set out in the plan.
h) The compliance officer shall review the trading plan and to approve and monitor the implementation of the plan
i) The trading plan once approved shall be irrevocable and the insider shall mandatorily have to implement the plan
j) If the very same unpublished price sensitive information is still in the insider’s possession, the commencement of execution of the trading plan ought to be deferred.
k) Upon approval of the trading plan, the compliance officer shall notify the plan to the stock exchanges on which the securities are listed
|No such concept|
|9||Disclosure||a) Insider including immediate relative would be give the disclosuresb) Disclosures should be maintained by the Company for five yearsc) Every promoter, KMP and director of every company shall disclose his holding of securities of the company as on the date of these regulations taking effect [that is May 15, 2015], to the company within 30 days of these regulations taking effect.
d) Every person on appointment as a KMP or a director of the company or upon becoming a promoter shall disclose his holding of securities of the company as on the date of appointment or becoming a promoter, to the company within 7 days of such appointment or becoming a promoter.
e) Every promoter, employee and director of every company shall disclose to the company the number of such securities acquired or disposed of within 2 trading days of such transaction if the value of the securities traded, whether in one transaction or a series of transactions over any calendar quarter, aggregates to a traded value in excess of 10 lakh rupees or such other value as may be specified
f) Every company shall notify the particulars of such trading to the stock exchange on which the securities are listed within 2 trading days of receipt of the disclosure or from becoming aware of such information.
g) The Company shall at its discretion require any other connected person or class of connected persons to make disclosures of holdings and trading in securities of the company in such form and at such frequency
|a) 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 beb) 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 under sub-regulation 13 (1) or under this sub-regulation; and such change exceeds 2% of total shareholding or voting rights in the company.c) Any person who is a director or officer of a listed company, shall disclose to the company and the stock exchange where the securities are listed 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 made under sub-regulation (2) or under this sub-regulation, and the change exceeds Rs. 5 lakh in value or 25,000 shares or 1% of total shareholding or voting rights, whichever is lower.
d) The disclosure shall be made by above mentioned persons 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
e) Every listed company, within 2 working days of receipt of the information, shall disclose to all stock exchanges on which the company is listed.
|10||codes of fair disclosure and conduct codes of fair disclosure and conduct||a) The board of directors of every listed company, shall formulate and publish on its official website, a code of practices and procedures for fair disclosure of unpublished PSI that it would follow in order to adhere to each of the principles set out in Schedule A and the same shall be intimated promptly to stock exchangesb) The board of directors of every listed company and market intermediary shall formulate a code of conduct as per schedule B to regulate, monitor and report trading by its employees and other connected persons towards achieving compliance||All listed companies, stock exchanges, FI, clearing house, professional firms shall frame a code of internal procedures and conduct as near thereto the Model Code as per schedule I|
|11||Investigation Authority & Penalty provision||Not mentioned appointment of investigation authority. SEBI shall take action as per act , if there is contravention of this regulation.||SEBI may appoint one or more officers to inspect the books and records of insider on suspicious of insider trading. Also, Insider shall be punishable under Sections 11, 11B, 11D, Chapter VIA and Section 24 of the Act|
|12||Model Code of Conduct & principles of fair disclosures||a) The compliance officer shall report to the board of directors and in particular, shall provide reports to the Chairman of the Audit Committee, if any, or to the Chairman of the board of directors at such frequency as may be stipulated by the board of directorsb) Employees and connected persons designated on the basis of their functional role (“designated persons”) in the organisation shall be governed by an internal code of conduct governing dealing in securities.
c) Designated persons and their immediate relatives shall not trade in securities when the trading window is closed.
d) The timing for re-opening of the trading window shall be determined by the compliance officer, but it shall not be earlier than forty-eight hours after the information becomes generally available.
e) The code of conduct shall specify any reasonable timeframe, which in any event shall not be more than seven trading days
f) The code of conduct shall stipulate such formats as the board of directors deems necessary for making applications for pre-clearance, reporting of trades executed, reporting of decisions not to trade after securing pre-clearance, recording of reasons for such decisions and for reporting level of holdings in securities at such intervals as may be determined as being necessary to monitor compliance with these regulations.
g) Prompt public disclosure of unpublished price sensitive information that would impact price discovery
h) Designation of a senior officer as a chief investor relations officer to deal with dissemination of information and disclosure of unpublished PSI
i) Appropriate and fair response to queries on news reports and requests for verification of market rumors by regulatory authorities.
j) Ensuring that information shared with analysts and research personnel is not unpublished price sensitive information
|Following are the features of model code of conduct-a) Part A Model Code of Conduct- for Listed Companies and Part B- For other entitiesb) Appointment of Compliance Officer
c) Definition of Trading Window
d) All directors/ officers / designated employees and their dependents (as defined by the company shall execute their order in respect of securities of the company within one week after the approval of pre-clearance is given
e) All directors/ officers/ designated employees who buy or sell any number of shares of the company shall not enter into an opposite transaction i.e. sell or buy any number of shares during the next six months following the prior transaction
f) The Compliance Officer shall maintain records of all the declarations in the appropriate form given by the directors/officers/designated employees for a minimum period of three years
g) Any employee/officer/director who trades in securities or communicates any information for trading in securities in contravention of the code of conduct may be penalized and appropriate action may be taken by the company