What is Silent Period?
Silent period is the period during with a Company’s senior management does not interact with the institutional investors, analysts and the media to ensure that there is no leakage of confidential information to selected group of stakeholders or investors.
However, at present there is no regulatory framework in place to regulated silent period.
What is Trading Window Closure?
Trading Period is the period during which the employee of the Company who have access to material information are prohibited from trading in the securities of the Company. The Securities and Exchange Board of India issued Prohibition of Insider Trading (PIT) Regulations to regulate dealing in securities of the Company.
The PIT regulations states that Companies shall close it trading window from the end of the quarter of which the financials are to be announced till 48 hours after the disclosure of financials results to the stock exchange.
Why Silent Period
The material information is generally available with the senior management of the Company. To avoid the exploitation of such information, the Company prohibits them from trading in securities of the Company while having such material information.
As the trading window closure period just restrict the employees of the Company to trade in its securities, it is also important to ensure that material information does not get leaked outside the organization. To ensure the same the listed companies adopt silent period policy.
During this period the top executives of the Company say the spokespersons are refrain from doing any public announcements and to conduct any investor/analyst call with institutional investors, analysts and the media.
Difference between Trading Window Closure and Silent Period:
|Trading Window Closure
|The purpose of trading window closure is to prohibit trading on the basis of inside information.
|The purpose of Silent Period is to prohibit communication of inside information illegitimacy.
|It is regulation by SEBI (Prohibition of Insider Trading) Regulation, 2015
|There is no regulatory framework in India on silent period.
|Duration of Trading Window closure is defined under SEBI PIT Regulations
|No defined period, it differ from Company to Company.
As there is no regulatory framework which regulated Silent Period there are many listed Companies in India which has adopted Silent Period Policy on voluntarily basis, as a good corporate practice. Some companies has kept the silent period same as to trading window closure period, while some adopted more strict period then trading window closure or vice- versa. Companies generally avoid any kind of interaction with analyst so as to avoid any leakage of material information, while some conduct meeting and discuss information which is generally available to public.