Insider trading is trading in the securities of a company by persons who are in the management of the company or those who are connected to them on the basis of knowledge of an Unpublished Price Sensitive Information (UPSI) which is not available to the general public. Insider trading, based on UPSI, is illegal and unethical. In India, Insider Trading is regulated by SEBI (Prohibition of Insider Trading) Regulations, 2015.
i) “Insider” means any person who is:
ii) “Unpublished Price Sensitive Information (UPSI)” means:
iii) “Trading” means and includes subscribing, buying, selling, dealing, or agreeing to subscribe, buy, sell, deal in any securities, and “trade” shall be construed accordingly.
CHAPTER II : RESTRICTIONS ON COMMUNICATION AND TRADING BY INSIDERS
Communication or procurement of unpublished price sensitive information
Regulation 3(1): No insider shall:
Regulation 3(2): No person shall procure from or cause the communication:
Regulation 3(3): Notwithstanding anything contained in this regulation, an UPSI may be communicated, provided, allowed access to or procured, in connection with a transaction that would:
|i) entail an obligation to make an open offer under the takeover regulations and directors of the company are of the opinion that sharing of such information is in the best interests of the company.||ii) not attract the obligation to make an open offer under the takeover regulations but where the board of directors of the company are of the opinion that sharing of such information is in the best interests of the company and ,
the information that constitute UPSI is disseminated to be made generally available at least two trading days prior to the proposed transaction.
Regulation 3(4): For purposes of sub regulation (3), the board of directors shall require the parties to execute contract of confidentiality and non disclosure obligations and such parties shall keep information so received confidential, except for the purpose of sub regulation (3), and shall not otherwise trade in securities of the company when in possession of unpublished price sensitive information
Regulation 3(5): The Board of directors shall ensure that:
Trading when in possession of unpublished price sensitive information
Regulation 4(1): No insider shall trade in securities that are listed or proposed to be listed on a stock exchange when in possession of UPSI.
Provided that the insider may prove his innocence by demonstrating the circumstances including the following:
1. Transaction is an off-market inter-se transfer between insiders in possession of UPSI.
2. Transaction was carried out through the block deal window mechanism
3. Transaction in question was carried out pursuant to a statutory or regulatory obligation.
4. Transaction in question was undertaken pursuant to the exercise of stock options
5. in respect of which the exercise price was pre-determined in compliance with applicable
6. in the case of non-individual insiders:
7. the trades were pursuant to a trading plan.
Regulation 4(2): In the case of connected persons:
Regulation 4(3): The Board may specify such standards and requirements, from time to time, as it may deem necessary for the purpose of these regulations.
(Chapter III): Disclosures of Trading By Insiders:
Regulation 6(1): Every disclosure under this chapter shall me made in such form as maybe prescribed.
Regulation 6(2): The disclosures made by any person under this Chapter shall include those relating to trading by such person’s immediate relatives, and by any other person for whom such person takes trading decisions.
Regulation 6(3): The disclosures of trading in securities shall also include trading in derivatives of securities and the traded value of the derivatives shall be taken into account for purposes of this Chapter.
Regulation 6(4): The disclosures made under this Chapter shall be maintained by the company, for a minimum period of five years, in such form as may be specified.
Disclosures by certain persons:
Regulation 7(1): Initial Disclosures
|a. Promoter (member of the promoter group), key managerial personnel and director||Company||Holding of securities of the company||Within thirty days of these regulations taking effect.|
|b. key managerial personnel or,a director or, a promoter or member of the promoter group||Company||Holding of securities of the company||Within seven days of such appointment or becoming a promoter|
Regulation 7(2): Continual Disclosures
|a. Promoter (or member of the promoter group or designated person) and director||Company||Number of such securities acquired or disposed of
(if value of the securities traded, whether in one transaction or a series of transactions over any calendar quarter, aggregates to a excess of ten lakh rupees or such other value as may be specified.
|Within 2 Trading Days from the transaction|
|b. Company||Stock Exchange||Same as above||Within 2 trading days of receipt of the disclosure|
Regulation 7(3): Disclosures by other connected persons
Any company whose securities are listed on a stock exchange may, 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 as may be determined by the company in order to monitor compliance with these regulations.
Regulation 8: Code of Fair Disclosure
1. The board of directors of every company, whose securities are listed on a stock exchange, shall formulate and publish on its official website, a code of practices and procedures for fair disclosure of unpublished price sensitive information.
2. Every such code of practices and procedures for fair disclosure of unpublished price sensitive information and every amendment thereto shall be promptly intimated to the stock exchanges where the securities are listed.