Trading

New SEBI Insider Trading Regulations 2015

  1. 1. NEW INSIDER TRADING REGULATIONS, 2015 -An INTROSPECTION
  2. 2.OVERVIEW With the objective of bringing the basic framework governing the regime of Insider Trading practices in line with the dynamic global scenario and to tighten the gaps of existing norms, SEBI has notified the New PIT Regulations to be renowned as SEBI (Prohibition of Insider Trading) Regulations, 2015, on 15th January, 2015. These Regulations will be effective w.e.f 15th May, 2015.
  3. 3.What is Insider Trading? Insider Trading is trading/ dealing of a company’s stock by an insider/ connected person on the basis of Unpublished Price Sensitive Information.
  4. 4.Who is an Insider? INSIDER CONNECTED PERSON PERSON IN POSSESSION OF UPSI The Regulations also intend to bring in its ambit persons who may seemingly not occupy any position in a company but are in regular touch with the company & its officers & have access to its internal nitty gritties. OR
  5. 5.Connected Person With Detailed Clarification…  Following shall be Connected/ Deemed to be connected with the Company:  any person who is or has been associated with company, in any manner, during the six months prior to the concerned act;  an immediate relative of the connected person;  a holding / associate/ subsidiary company;  an official of stock exchange or of clearing corporation;  a banker of the company;  A concern, firm, trust, HUF, company or AOP wherein a director of a company/ immediate relative/ banker of company, has more that 10% of the holding or interest;
  6. 6.What includes Trading? Trading means and includes:  Subscribing;  Buying;  Selling;  Dealing;  Agreeing to buy, sell, subscribe, deal in any securities;
  7. 7.UNPUBLISHED PRICE SENSITIVE INFORMATION Any information, relating to a company or its securities, that is not generally available, and is likely to materially affect the price of the securities is a UPSI. It includes:-  Financial results;  Dividends;  Change in capital structure;  Mergers, de-mergers, acquisitions, delisting and such other transactions;  Changes in KMPs;  Material events in accordance with listing agreement;
  8. 8.Who will Monitor?  The Regulations have casted major responsibility for monitoring & implementing the codes specified in these Regulations upon the Compliance Officer;  Compliance Officer means any senior officer, designated so and reporting to the BOD, who is financially literate and well-versed with legal & regulatory compliances;  He 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;
  9. 9.THE RULE & exceptions thereto… No insider shall communicate, provide or allow access to any UPSI, to any person including other insiders, however, there are certain exceptions to this:  Except for performance of duties, for legitimate business purposes & on a need to know basis. :  UPSI may be communicated in connection with an open offer under the takeover regulations, where the BOD is of the view that the proposed transaction is in the best interest of the company;  If the proposed transaction does not entail an open offer, then the BODs shall disseminate the UPSI atleast 2 trading days prior to the proposed transaction;
  10. 10.Defences available to an Insider THE ONUS OF PROVING THE INNOCENCE LIES ON THE INSIDER  Contract confidentiality & Non-disclosure agreements has been executed;  The transaction is an off-market inter-se transfer between promoters; In case of non-individual insiders:  Individuals who were in possession of such UPSI were different from the individuals taking decisions;  Appropriate & adequate arrangements were in place to ensure that Regulations are not violated;  Trades were pursuant to a trading plan;
  11. 11.TRADING PLAN  These Regulations entail a new concept of trading plans which was not there under the erstwhile Regulations on insider trading:  Insider shall have an option to formulate a Trading Plan & present it to compliance officer for approval & public disclosure. Upon approval, the Compliance Officer shall notify the TP to the Stock Exchanges.  Trading plan shall be for a period of 12 months.  Such TP shall not entail commencement of trading earlier than 6 months from public disclosure of plan.
  12. 12. Trading shall not commence for the period between 20th trading day prior to

    last day of any financial period for which results are required to be announced by the issuer of the securities & 2nd trading day after the disclosure of such financial results.  TP shall set out value of trades to be effected or number of securities to be traded along with the nature of trade; and also the intervals/ dates on trade execution;  Trading by designated persons shall be subject to pre-clearance by compliance officer.  Overlapping TPs are not allowed.  A TP once approved, shall be irrevocable and cannot be withdrawn. Continued…

  13. 13.Codes Of Conduct CODE OF FAIR DISCLOSURE CODE OF CONDUCT Formulated by: Board of directors of every listed company Policies shall be framed in accordance with Schedule A & publish on its website Formulated by: Board of directors of every listed companies, market intermediaries & all other persons (including professional firms, auditors, consultants etc.) who are essentially in possession of UPSI Policies shall be framed in accordance with Schedule B
  14. 14.Code of Fair Disclosure, Schedule A …...a new concept Some important contents of this Code are:  Uniform & universal dissemination of UPSI to avoid selective disclosure;  Designation of a senior officer as a chief investor relations officer to deal with dissemination of information & disclosure of UPSI;  Appropriate & fair response to queries on new reports & requests for verification of market roumers by regulatory authority;  Ensuring that information shared with analysts & research personnel is not UPSI; And more…..
  15. 15.Code of Conduct, Schedule B (Common for Companies & Intermediaries)  All information shall be handled within the organization on a need-to-know basis;  The BOD shall, in consultation with the Compliance Officer, specify the designated persons to be covered by such code;  A notional trading window shall be used as an instrument of monitoring trading by designated persons. Trading window shall be closed designated persons is expected to be in possession of UPSI;  Compliance officer shall determine timing for re-opening of the trading window, which shall not be than 48 hrs when the information becomes publically available;  Designated persons shall be subject to pre-clearance by compliance officer;  Code of conduct shall stipulate such formats as the BOD deems fit for making applications for pre-clearance etc.; And more…..
  16. 16.DISCLOSURES INITIAL DISCLOSURE CONTINUAL DISCLOSURE DISCLOSURE BY CONNECTED PERSONS
  17. 17.TYPE OF DISCLOSURE WHAT BY TO DURATION INITIAL DISCLOSURES Holding in the Company Promoter, KMP or Director of a listed company Company Within 30 days of these Regulation taking effect Holding on the date of appointment Promoter, KMP or Director Company Within 7 days of such appointment CONTINUAL DISCLOSURES Value of securities traded, in aggregate, in a calendar quarter, exceeds traded value of Rs. 10 Lac or any other value as may be prescribed Promoter or Director or Employee Company Within two days of such transaction Company Stock Exchange Within two days of receipt of disclosure
  18. 18.TYPE OF DISCLOSURE WHAT BY TO DURATION DISCLOSURE BY OTHER CONNECTED PERSON As required by the company Connected Person Company As specified by the Company
  19. 19.PENALTIES Any contravention of these Regulations shall be dealt with by SEBI in accordance with the SEBI Act, 1992. MONETARY PENALTY: Section 15G of the Act imposes penalty of atleast Rs10 Lacs, which may extend to Rs. 25 Crore or three times of profits made out of insider trading, whichever is higher. IMPRISONMENT: Section 24 of SEBI Act even goes to the extent of imprisonment upto 10 years or fine upto Rs. 25 Crore, or both, for any offences pertaining to contravention of the provisions of the Act.
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Category: Trading

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