SEBI Master Circular on Surveillance of Securities Market

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Securities and Exchange Board of India

Master Circular No. SEBI/HO/ISD/ISD-PoD-2/P/CIR/2022/118 | Dated: September 13, 2022

To
1. All Recognized Stock Exchanges
2. All Depositories
3. All Listed Companies
4. All Market Intermediaries registered with SEBI under Section 12 of the SEBI Act, 1992
5. Fiduciaries as per SEBI (Prohibition of Insider Trading) Regulations, 2015

Dear Sir/Madam,

Sub: Master Circular on Surveillance of Securities Market

1. In order to ensure availability of comprehensive information mentioned in the circulars pertaining to Surveillance of Securities Market at one place, SEBI has been issuing Master Circular. This circular covers various circulars issued till August 31, 2022 by Integrated Surveillance Department.

2. This Master Circular shall supersede previous Master Circular No.SEBI/HO/ISD/ISD/ CIR/P/2021/22 dated March 01, 2021.

3. This circular is issued with the approval of Competent Authority.

4. This Master Circular is available on the SEBI website at https://www.sebi.00v.in/ under the category “Legal4Master Circulars”

Yours faithfully,

Nitin Singh
Deputy General Manager
Phone: +91-22-26449254
E-mail: nitinssebi.gov.in

1. Trading Rules and shareholding in dematerialized mode’

1.1. In order to moderate sharp and destabilizing price movements in shares of companies, to encourage better price discovery and to increase transparency in securities market, SEBI in consultation with Stock Exchanges has decided to adopt following measures: –

1.1.1. (*)…………. 2

1.1.2. (**) ………. 3 (***) ………………. 4

1.1.3. (****) ……. 1.1.4 (*****)….. 5

6 …………

1.1.4. In all cases, wherein the companies do not satisfy the above criteria7, the trading in securities of such companies shall take place in trade for trade segment. For the above purpose, the exchanges shall take the latest shareholding pattern as required to be submitted by the listed companies with exchanges in pursuance to the Listing agreement as of the preceding quarter or of any subsequent date8.

1.1.5. In addition to above 9measures, in the following cases (except for the original scrips, on which derivatives products are available or included in indices on which derivatives products are available) the trading shall take place in TFT segment for first 10 trading days with applicable price band while keeping the price band open on the first day of trading.

1.1.5.1. Merger, demerger, amalgamation, capital reduction/consolidation, scheme of arrangement, in terms of the Companies Act and/or as sanctioned by the Courts, in cases *of rehabilitation packages approved by the Board of Industrial and Financial Reconstruction under Sick Industrial Companies Act and in cases of Corporate Debt Restructuring (CDR) packages by the CDR Cell of the RBI.

1.1.5.2. Securities that are being admitted to trading from another exchange by way of direct listing/MOU/securities admitted for trading under permitted category.

1.1.5.3. Where suspension of trading is being revoked after more than one year.

1.1.6. Further, in all cases, the exchanges shall ensure that before starting trading in scrips, the companies have complied with the disclosure requirements and the same is publicly disseminated on the website of exchanges to enable investors to take informed decision.

2. Unauthenticated news circulated by SEBI Registered Market Intermediaries through various modes of communication10

2.1. It has been observed by SEBI that unauthenticated news related to various scrips are circulated in blogs/chat forums/e-mail etc. by employees of Broking Houses/Other Intermediaries without adequate caution as mandated in the Code of Conduct for Stock Brokers and respective Regulations of various intermediaries registered with SEBI.

2.2. It was also observed that the Intermediaries do not have proper internal controls and do not ensure that proper checks and balances are in place to govern the conduct of their employees. Due to lack of proper internal controls and poor training, employees of such intermediaries are sometimes not aware of the damage which can be caused by circulation of unauthenticated news or rumours. It is a well-established fact that market rumours can do considerable damage to the normal functioning and behaviour of the market and distort the price discovery mechanisms.

2.3. In view of the above facts, SEBI Registered Market Intermediaries are directed that:

2.3.1. Proper internal code of conduct and controls should be put in place.

2.3.2. Employees/temporary staff/voluntary workers etc. employed/working in the Offices of market intermediaries do not encourage or circulate rumours or unverified information obtained from client, industry, any trade or any other sources without verification.

2.3.3. Access to Blogs/Chat forums/Messenger sites etc. should either be restricted under supervision or access should not be allowed.

2.3.4. Logs for any usage of such Blogs/Chat forums/Messenger sites (called by any nomenclature) shall be treated as records and the same should be maintained as specified by the respective Regulations which govern the concerned intermediary.

2.3.5. Employees should be directed that any market related news received by them either in their official mail/personal mail/blog or in any other manner, should be forwarded only after the same has been seen and approved by the concerned Intermediary’s Compliance Officer. If an employee fails to do so, he/she shall be deemed to have violated the various provisions contained in SEBI Act/Rules/Regulations etc. and shall be liable for action. The Compliance Officer shall also be held liable for breach of duty in this regard”.

3. SEBI (Prohibition of Insider Trading) Regulations, 2015

3.1. Disclosures under SEBI (Prohibition of Insider Trading) Regulations, 201512

3.1.1. With reference to the requirements of Regulation 6 of SEBI (Prohibition of Insider trading) Regulations 2015 (“the Regulations”), the disclosures may be maintained by the company in physical/electronic mode as per the prescribed format (Annexure 113)

3.1.2. With reference to the requirements of the Regulation 8 (Code of Fair Disclosure) and Regulation 9 (Code of Conduct) of the Regulations, the companies shall also ensure that:

3.1.2.1 Formulated and published (on its official website), code of practices and procedures for fair disclosure of Unpublished Price Sensitive Information (UPSI), is confirmed to the stock exchanges, immediately.

3.1.2.2. Formulated code of conduct is confirmed to the stock exchanges, immediately.

3.1.2.3. A company deals with only such market intermediary / every other person, who is required to handle UPSI, who have formulated a code ofm conduct as per the requirements of the Regulations.

3.2. Allowing Offer for Sale (OFS) and Rights Entitlements (RE) transactions during trading window closure period 14

3.2.1. Vide Gazette Notification No. SEBI/LAD-NRO/GN/2020/23 dated July 17, 2020, Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 2015 (“PIT Regulations”) have been further amended.

3.2.2. Clause 4 (3) (b) of Schedule B read with Regulation 9 of PIT Regulations, inter-alia, states that trading window restrictions shall not apply in respect of transactions mentioned therein or transactions undertaken through such other mechanism as may be specified by the Board from time to time.

3.2.3. In addition to the transactions mentioned in Clause 4 (3) (b) of Schedule B read with Regulation 9 of PIT Regulations, trading window restrictions shall now not apply in respect of OFS and RE transactions carried out in accordance with the framework specified by the Board from time to time.

3.3. Reporting to Stock Exchanges regarding violations under Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 2015 relating to the Code of Conduct (CoC) 15

3.3.1. In terms of clause 13 of Schedule B (in case of listed companies) and clause 11 of Schedule C (in case of intermediaries and fiduciaries) read with Regulation 9 of the amended PIT Regulations, the listed companies, intermediaries and fiduciaries shall promptly inform the Stock Exchange(s) where the concerned securities are traded, regarding violations relating to CoC under PIT Regulations in such form and manner as may be specified by the Board from time to time.

3.3.2. The standard format as specified by SEBI for reporting of violations related to CoC is placed at Annexure 2. The listed companies, intermediaries and fiduciaries shall inform the violations of PIT Regulations relating to CoC as per the format to the Stock Exchange(s).

3.3.3. Further, in terms of clause 12 of Schedule B and clause 10 of Schedule C read with Regulation 9 of the PIT Regulations, any amount collected by the listed companies, intermediaries and fiduciaries under these clauses for violation(s) of CoC shall be remitted to the Board for credit to the Investor Protection and Education Fund (IPEF) administered by the Board under the Securities and Exchange Board of India Act, 1992.

3.3.4. 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:

Name of Beneficiary	SEBI — IPEF
Bank Name	Bank of India
Bank Branch	Bandra Kurla Complex (BKC)
Account Number	012210210000008
IFSC Code	BKID0000122

3.4. Automation of Continual Disclosures under Regulation 7(2) of SEBI (Prohibition of Insider Trading) Regulations, 2015 – System driven disclosures16

3.4.1. SEBI, vide circular no. CIR/CFD/DCR/17/2015 dated December 01, 2015, CFD/DCR/CIRJ2016/139 dated December 21, 2016 and SEBI/HO/CFD/ DCR1/CIR/ P/2018/85 dated May 28, 2018, implemented the system driven disclosures in phases, under SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 and PIT Regulations.

3.4.2. Pursuant to the amendment of PIT Regulations and discussions held with the Stock Exchanges and Depositories, it has now been decided to implement the system driven disclosures for member(s) of promoter group and designated person(s) in addition to the promoter(s) and director(s) of company (hereinafter collectively referred to as entities) under Regulation 7(2) of PIT Regulations.

3.4.3. To begin with, the system driven disclosures shall pertain to trading in equity shares and equity derivative instruments i.e. Futures and Options of the listed company (wherever applicable) by the entities.

3.4.4. The procedure for implementation of the system driven disclosures is provided at Annexure 3.

3.4.5. The Depositories and Stock Exchanges shall make necessary arrangements such that the disclosures pertaining to PIT Regulations are disseminated on the websites of respective stock exchanges with effect from October 01, 2020.

3.4.6. The system would continue to run parallel with the existing system i.e. entities shall continue to independently comply with the disclosure obligations under PIT Regulations as applicable to them till March 31, 202117.

3.4.7. As currently done, the disclosures generated through the system shall be displayed separately from the regular disclosures filed with the exchanges.

3.4.8. This circular supersedes the earlier circulars dated December 01, 2015, December 21, 2016 and May 28, 2018 with respect to implementation of System driven disclosures under PIT Regulations.

3.4.9. It has now been decided to include the listed debt securities of equity listed companies under the purview of the said System Driven Disclosures for the entities mentioned at Para 3.4.10 above. Further, the procedure for implementation of System Driven Disclosures as provided in SEBI circular no. SEBI/HO/ISD/ISD/CIR/P/2020/168 dated September 09, 2020, shall also be applicable for the listed Debt Securities.

3.4.10. The Depositories and Stock Exchanges shall make necessary arrangements such that the disclosures pertaining to listed Debt Securities along with equity shares and equity derivative instruments are disseminated on the websites of respective stock exchanges with effect from July 01, 202118.

3.4.11. It is, therefore, clarified that for listed companies who have complied with requirements of the circular dated September 09, 2020, the manual filing of disclosures as required under Regulation 7(2) (a) & (b) of PIT Regulations is no longer mandatory19.

3.5. Trading Window closure period under Clause 4 of Schedule B read with Regulation 9 of SEBI (Prohibition of Insider Trading) Regulations, 2015 (“PIT Regulations”) – Framework for restricting trading by Designated Persons (“DPs”) by freezing PAN at security leve120

3.5.1. Clause 4 (1) of Schedule B read with Regulation 9 of PIT Regulations, inter-alia, states that “Designated persons may execute trades subject to compliance with these regulations. Towards this end, a notional trading window shall be used as an instrument of monitoring trading by the designated persons. The trading window shall be closed when the compliance officer determines that a designated person or class of designated persons can reasonably be expected to have possession of unpublished price sensitive information (“UPSI”). Such closure shall be imposed in relation to such securities to which such UPSI relates. Designated persons and their immediate relatives shall not trade in securities when the trading window is closed”.

3.5.2. One of the instances of closure of trading window is provided in Clause 4 (2) of Schedule B read with Regulation 9 of PIT Regulations, which inter-alia states that “trading restriction period shall be made applicable from the end of every quarter till 48 hours after the declaration of financial results………… “

3.5.3. In order to rationalize the compliance requirement under Clause 4 of Schedule B read with Regulation 9 of PIT Regulations, improve ease of doing business and Page 2 of 8 prevent inadvertent non-compliances of provisions of PIT Regulations by DPs, after having deliberations with Stock Exchanges and Depositories and listed companies, it has been decided that Stock Exchanges and Depositories shall develop a system to restrict trading by DPs of listed company during trading window closure period.

3.5.4. To begin with, the provisions of this circular shall be applicable to declaration of financial results of the listed company that is or was part of benchmark indices i.e. NIFTY 50 and SENSEX from the date of implementation of this circular. Further, to begin with, the restriction on trading shall be for on-market transactions, off-market transfers and creation of pledge in equity shares and equity derivatives contracts (i.e. Futures and Options) of such listed companies. 5. The procedure for implementation of the system is enclosed at Annexure- A. The flow chart of the same is enclosed at Annexure – B.

3.5.5. This circular shall come into force with effect from the quarter ending September 30, 2022.

3.5.6. The Compliance Officer and DPs of listed companies shall continue to independently comply with the obligations under PIT Regulations, as applicable to them, till further communication.

Notes:

1 Circular SEBI/Cir/ISD/ 1 /2010 dated September 02, 2010

2 Circular SEBI/Cir/ISD/1/2010 dated September 02, 2010 and Circular SEBI/Cir/ISD/2/2010 dated October 26, 2010 (*) – The securities of all companies shall be traded in the normal segment of the exchange if and only if, the company has achieved at least 50% of non-promoters holding in dematerialized form by October 31512010. While computing the requirement of minimum 50% shareholding of non- promoters in demat form in a company, the government holding in non-promoter category may be excluded.

3 Circular SEBI/Cir/ISD/3/2011 dated June 17, 2011 (**) – In order to further promote dematerialization of securities, encourage orderly development of the securities market and to improve transparency in the dealings of shares by promoters including pledge / usage as collateral, SEBI in consultation with Stock Exchanges, has decided that the securities of companies shall be traded in the normal segment of the exchange if and only if, the company has achieved 100% of promoter’s and promoter group’s shareholding in dematerialized form

“Circular SEBI/Cir/ISD/5/2011 dated September 30, 2011 (***) – Extension of time – latest by the quarter ended December 2011

5 Circular SEBI/Cir/ISD/ 1 /2012 dated March 30, 2012 (****) – In light of representations received from various companies and in consultation with Stock Exchanges, it has been decided that following exemptions shall be taken into consideration while arriving

at compliance with 100% promoter(s) holding in demat form. Such exemption shall be applicable in cases where: –

Promoter(s) have sold their shares in physical mode and such shares have not been lodged for transfer with the company; or
Matters concerning part/entire shareholding of promoters/promoter group are sub judice before any Court/Tribunal; or
Shares cannot be converted into demat form due to death of any promoter(s);

(*****) for availing such exemption, companies shall approach Stock Exchange(s) along with necessary documentary evidence.

61.1.1 (*) to 1.1.4 (*****) —- As per LODR Regulation 2015 — Schedule X, said circulars have been rescinded, contents of the said circulars have been broadly included in CFD circular no. CIR/CFD/CMD/13/2015 dated 30.11.2015.

‘ Refer pre-page para 1.1.2 (**) of the circular SEBI/Cir/ISD/3/2011 dated June 17, 2011

8 circular SEBI/Cir/ISD/3/2011 dated June 17, 2011

9 Refer pre-page para 1.1.1 (*) of the Circulars SERI/Cir/ISD/1/2010 dated September 02, 2010 and SEBI/Cir/ISD/2/2010 dated

October 26, 2010

(*) Now broadly under the framework of Insolvency and Bankruptcy Code, 2016

1° Circular Cir/ISD/ 1 /2011 dated March 23, 2011

11 Circular Cir/ISD/ 2 /2011 dated March 24, 2011

12 Circular Cir/ISD/ 1 /2015 dated May 11, 2015

13 The formats have been revised vide Circular Cir/ISD/ 2 /2015 dated September 16, 2015 and are further updated vide Circular SEBI/HO/ISD/ISD/CIR/P/2021/19 dated Feb 09, 2021

14 Circular SEBI/HO/ISD/ISD/CIR/P/2020/133 dated July 23, 2020

15 Circular SEBI/HO/ISD/ISD/CIR/P/2020/135 dated July 23, 2020

16 Circular SEBI/HO/ISD/ISD/CIR/P/2020/168 dated September 09, 2020