Securities and Exchange Board of India (Prohibition of Insider Trading) (Amendment) Regulations, 2018

Jan 07, 2019 | by Avantis RegTech Legal Research Team


The Securities and Exchange Board of India (SEBI) on December 31, 2018 has published Securities and Exchange Board of India (Prohibition of Insider Trading) (Amendment) Regulations, 2018 to further amend the Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 2015. They shall come into force on April 01, 2019.

Some of the major amendments in the Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 2015 are as under:

·         In Regulation 2(1)  which specifies the definitions:

o   In clause (c), following explanation shall be inserted at the end, namely:

“Explanation–For the purpose of this regulation, “financially literate” shall mean a person who has the ability to read and understand basic financial statements i.e. balance sheet, profit and loss account, and statement of cash flows.”

o   In clause (h), the numbers “2009” shall be substituted with the numbers “2018”

o   after clause (h), following clause shall be inserted, namely:

“(ha) “proposed to be listed” shall include securities of an unlisted company:

(i)                  if such unlisted company has filed offer documents or other documents, as the case may be, with the Board, stock exchange(s) or registrar of companies in connection with the listing; or

(ii)                if such unlisted company is getting listed pursuant to any merger or amalgamation and has filed a copy of such scheme of merger or amalgamation under the Companies Act, 2013; ”

o   In clause (n), sub-clause (vi) shall be omitted.

·         In Regulation 3 which specifies procedure for communication or procurement of unpublished price sensitive information:

o   After Sub-regulation (2), following sub-regulation shall be inserted, namely:

“(2A) The board of directors of a listed company shall make a policy for determination of “legitimate purposes” as a part of “Codes of Fair Disclosure and Conduct” formulated under regulation 8.”

o   After Sub-regulation (2A), following explanation shall be inserted, namely:

“Explanation–For the purpose of illustration, the term “legitimate purpose” shall include sharing of unpublished price sensitive information in the ordinary course of business by an insider with partners, collaborators, lenders, customers, suppliers, merchant bankers, legal advisors, auditors, insolvency professionals or other advisors or consultants, provided that such sharing has not been carried out to evade or circumvent the prohibitions of these regulations.”

o   After explanation to sub-regulation (2A), following sub-regulation shall be inserted, namely:

“(2B) Any person in receipt of unpublished price sensitive information pursuant to a “legitimate purpose” shall be considered an “insider” for purposes of these regulations and due notice shall be given to such persons to maintain confidentiality of such unpublished price sensitive information in compliance with these regulations.”

o   After sub-regulation (4), following sub-regulation shall be inserted, namely:

“(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.”

·         In Regulation 4 which specifies procedure for trading when in possession of unpublished price sensitive information:

o   In Sub-regulation (1), before the proviso, following explanation shall be inserted, namely:

“Explanation- When a person who has traded in securities has been in possession of unpublished price sensitive information, his trades would be presumed to have been motivated by the knowledge and awareness of such information in his possession;”

o   In Sub-regulation (1), in proviso, in clause (i), following proviso shall be inserted, namely:

“Provided that such unpublished price sensitive information was not obtained under sub-regulation (3) of regulation 3 of these regulations.”

o   In Sub-regulation (1), in proviso, in clause (i), after the proviso following proviso shall be inserted, namely:

"Provided further that such off-market trades shall be reported by the insiders to the company within two working days. Every company shall notify the particulars of such trades to the stock exchange on which the securities are listed within two trading days from receipt of the disclosure or from becoming aware of such information."

o   In Sub-regulation (1), in proviso, after clause (i), following clauses shall be inserted, namely:

(a)    (ii)-the transaction was carried out through the block deal window mechanism between persons who were in possession of the unpublished price sensitive information without being in breach of regulation 3 and both parties had made a conscious and informed trade decision; Provided that such unpublished price sensitive information was not obtained by either person under sub-regulation (3) of regulation 3 of these regulations.

(b)   (iii)-the transaction in question was carried out pursuant to a statutory or regulatory obligation to carry out a bona fide transaction.

(c)    (iv)-the transaction in question was undertaken pursuant to the exercise of stock options in respect of which the exercise price was pre-determined in compliance with applicable regulations.”

·         In Regulation 5 which specifies the provisions for Trading Plans, in sub-regulation (3), following provisos shall be inserted, namely:

“Provided that pre-clearance of trades shall not be required for a trade executed as per an approved trading plan.

Provided further that trading window norms and restrictions on contra trade shall not be applicable for trades carried out in accordance with an approved trading plan.”

·         After Regulation 9, a new Regulation 9A shall be inserted, namely:

“Institutional Mechanism for Prevention of Insider trading.”

·         after Schedule B, Schedule C shall be inserted, namely:

“Schedule C - Minimum Standards for Code of Conduct for Intermediaries and Fiduciaries to Regulate, Monitor and Report Trading by Designated Persons.”

[Notification No. SEBI/LAD-NRO/GN/2018/59]

 

URL: http://egazette.nic.in/WriteReadData/2018/194799.pdf     


Bookmark

Related Updates



Alternate Text

Get updates on the go on RuleZbook Mobile App.