The Securities and Exchange Board of India (SEBI) has notified the SEBI (Prohibition of Insider Trading) Regulations, 2015 on 15th January, 2015.

The new Regulations chalk out a stricter and more focused regulatory regime and have put in place a stronger legal and enforcement framework for prevention of Insider Trading. The penalties imposed under the Companies Act, 2013 and the SEBI Act, 1992 for non-compliance and contravention of these Regulations are huge. The new Regulations have been uploaded on the MMFSL intranet portal.

Following are the important provisions of the Regulations:

  • There shall be prohibition on all designated persons for exercise of ESOPs during the trading window closure period and there shall be prohibition on all designated persons for exercise of ESOPs for six months after sale of shares, and vice versa.
  • There shall be no contra trade even in case of ESOP.
  • The Regulations prescribe that every employee shall disclose to the Company (Compliance Officer) details of the trade within 2 trading days of the transaction, if the value of securities traded in one or a series of transactions in any calendar quarter exceeds Rs.10 lakhs. The disclosures shall include those relating to trading by immediate relatives and by any other person for whom the trading decisions are taken.
  • A designated person who buys or sells any number of securities of the company shall not enter into an opposite transaction i.e. sell or buy respectively any number of securities of the Company during the next six months following the prior transaction.
  • A new concept of trading plans has been introduced in India for an insider under the Regulations.
  • If any Designated Person or his/her immediate relative(s) intend(s) to trade in securities exceeding market value of Rs. 42 lakhs during a calendar month, then he/she should apply to the Compliance Officer for pre-clearance, even during the period when the window is open.
  • The trading window shall be closed for adopting and considering financial results and other Unpublished Price Sensitive Information (UPSI) matters.
  • The trading window shall be closed when the Compliance Officer determines that a designated person or class of designated persons can reasonably be expected to have possession of unpublished price sensitive information. Moreover, the designated persons and their immediate relatives shall not trade in securities when the trading window is closed.

To view the article in full click here

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.