SEBI has notified its amendments to the Securities and Exchange Board of India (Prohibition of Insider Trading Regulation), 2015 vide notification dated 25th July 2019. The important aspect of this amendment is to make curative changes in the Regulations, in response to difficulties expressed by the stakeholders.
The amendments clarifies that trading window closure for listed companies is mandatory and shall be applicable from end of every quarter till 48 hours after declaration of financial results and with respect to closure of trading window covered under clause 4 of schedule B, shall not to applicable in respect of certain transactions, given below.
Highlights of the SEBI (PIT) 2nd amendment 2019 are as follows:
1. Employees having access to unpublished price sensitive information are to be identified as ‘Designated persons’ – not “designated employees”.
2. The Trading Window Closure shall be made applicable from the end of every quarter till 48 hours after the declaration of financial results (The word ‘can’ is substituted by ‘shall’ making it a mandatory and uniform compliance).
3. In Schedule B:
Clause 4 has been divided into sub-clauses, and a new clause (3) with exemptions from applicability of the trading window has been introduced in respect of:
a)Transactions such as off-market inter-se transfer between insiders
b) The transaction which was carried out through the block deal window Mechanism between persons who were in possession of the same unpublished price sensitive information where both parties have made informed trade decision
c) The transaction carried out pursuant to a statutory or regulatory obligation to carry out a bona fide transaction.
d)Trades were pursuant to a trading Plan
e) Exercise of stock options in respect of which the exercise price was pre-determined
f) Pledge of shares for a bonafide purpose like raising of funds subject to pre-clearance by the compliance officer
g) transactions which are undertaken in accordance with respective regulations made by the Board such as acquisition by conversion of warrants or debentures, subscribing to rights issue, further public issue, preferential allotment or tendering of shares in a buy-back offer, open offer, delisting offer
4. As per clause 14 of schedule B, w.e.f 01 April 2019, Designated persons were required to disclose names and Permanent Account Number or any other identifier authorized by law of the persons such as immediate relatives and persons with whom they share a material financial relationship to the company on an annual basis and as and when the information changes.
Amendment has been introduced to carve out exemptions and to give clarification in the definition of the term “material financial relationship”. It now means, a person, who is a recipient of any kind of payment such as by way of a loan or gift from a designated person during the immediately preceding 12 months, equivalent to at least 25% of the annual income of such designated person, but shall exclude relationships in which the payment is based on arm’s length transactions.
5. Further while giving the disclosure under clause 14 of Schedule B (as mentioned above) and under Schedule C, the details of Educational institutions from which designated person have graduated, is to be disclosed to the intermediary or fiduciary on an annual basis and as when the information changes. (The word studied is substituted by Graduated).
Click here to read the notification.
