Amendment in SEBI (Prohibition of Insider Trading) Regulations, 2015

SEBI vide its notification dated July 25, 2019 has amended the SEBI (Prohibition of Insider Trading) Regulations, 2015. These changes are effective from July 25, 2019.

The key highlights of the amendment are as follows:

1.      The trading window restrictions shall not apply in respect of following transactions:

                                  i.         in respect of a pledge of shares for a bonafide purpose such as raising of funds, subject to pre-clearance by the compliance officer and compliance with the respective regulations made by the Board;

                                ii.                   off-market inter-se transfer of shares between insiders who were in possession of same UPSI without being in breach of Regulation 3 (communication or procurement of UPSI) and both parties made a conscious and informed trade decision;

                              iii.       transaction is carried out through block deal mechanism between persons who were in possession of same UPSI without being in breach of Regulation 3 and both parties made a conscious and informed trade decision;

                              iv.          transaction was carried out pursuant to a statutory or regulatory obligation to carry out a bonafide transaction;\

                                v.     transaction in question was undertaken pursuant to exercise of stock options in respect of which exercise price was pre-determined in compliance with applicable regulations;

                                   vi.       trades executed pursuant to trading plan;  
  

                            vii.          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 buyback offer, open offer, delisting offer.

2.      Material Financial Relationship – Annual income of Designated Person (Schedule B Point 14 and Schedule C Point 12): For the purpose of determining Material Financial Relationship (“MFR”) now annual income of only designated persons is to be considered. Also with this amendment now only those transactions will be covered under MFR where the ‘designated person’ is giver and transaction is equivalent to 25% of annual income of designated person. Earlier, it covered receipt of financial help by designated person as well.

The difficulty in ascertaining the payer’s income (third party) on the basis of which MFR was decided is done away with this amendment.

3.      Disclosure by Designated Person:  The detail of educational institutions where the designated person has graduated is required to be given instead of studied.  

The above referred amendment is applicable to listed companies, intermediaries and fiduciaries.

4.      Closure of trading window: (Schedule B Point 4): The Listed Company is required to close trading window from the end of every quarter till 48 hours after the declaration of financial results.