SEBI (Prohibition of Insider Trading) Regulations, 2015 amended

The Securities and Exchange Board of India (SEBI) vide notification dated 17th September,  2019 has published the Securities and Exchange Board of India (Prohibition of Insider Trading) (Third Amendment) Regulations, 2019. SEBI has introduced chapter III-A which governs the provisions relating to procedure for giving information, informant reward and confidentiality.

The amendment has been done to include provision for an Informant mechanism for early detection of insider trading and better enforceability. It will also seek to prevent victimisation of the informant. It provides ‘near absolute confidentiality along with appropriate surveillance.

Key highlights of the amendment:

  1. Section 7A contains various definitions. Section 7A (b) defines Informant as a person voluntarily submitting a form detailing credible, complete and original information relating to an act of insider trading and the term “original information” means any relevant information derived from independent knowledge which is not known to the board through any source and must be sufficiently specific and credible.
  2. The Informant shall submit original information by furnishing the voluntary information disclosure form to the office of informant protection board under section 7B. The information and the identity of the informant shall be confidential. On receipt of original information, the officer of informant protection shall submit it to the relevant department for further examination.
  3. The Board may at its sole discretion, declare an informant eligible for reward under section 7D and the amount of reward shall be determined by the board under section 7E. The informant shall file an application in the format provided in schedule E for claiming such reward.
  4. If the informant has not submitted original information, or the information has been acquired through any member or officer, or against whom the board has initiated criminal proceedings, in such circumstances the Board may reject the claim for reward under Section -7G.
  5. If any employee during his employment files a voluntary information disclosure form, irrespective of whether the information is considered or rejected, such employee shall be protected against retaliation and victimisation. These regulations shall not be deemed to provide any amnesty or immunity to an informant for violation of securities law. In case any action taken by the Board, the informant may after payment of monetary  amount shall be eligible for reward.
  6. A new Schedule D (Form for Informant’s Voluntary Information Disclosure) and Schedule E (Form for Informant’s Reward Claim) has been inserted through this amendment.

The amendment shall be in effect from 26th December, 2019.

Click here to read the notification.

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