The Tax Publishers

SEBI Act, 1992--Insider Trading

SEBI--Overview of Revised Disclosure Formats in Insider Trading Regulations

CA. Jyoti Jain

One of the essential ingredients for economic growth of a country is an existence of a fair, transparent and efficient securities market. SEBI, the regulator of securities market has taken various steps to ensure that market activities are conducted on fair basis and hence, re-introduced the SEBI (Prohibition of Insider Trading) Regulations, 2015 (PIT Regulations) by repealing earlier regulations to prevent insider trading. Various amendments have been made in PIT Regulations from time to time. One of the recent amendments are in relation to changes in disclosure formats. The aim of present write-up is to throw light on the revised disclosure formats under PIT Regulations.

1. Insider trading

When the trading takes place on the basis of imbalance of information resulting in one party to the transaction having advantage over the other party by reason of his having unpublished price sensitive information. Such trading is called insider trading. This type of trading takes place when the insiders or other persons who, by virtue of their position in the office or otherwise, have access to the unpublished price sensitive information relating to the affairs of a company, and deal in securities of such company or cause the trading of securities of such company or being which in possession of such information communicate such information to others who use it in connection with the purchase or sale of securities.

To curb the practice of insider trading, SEBI has introduced SEBI (Prohibition of Insider Trading) Regulations, 2015 with effect from 15th May, 2015, by repealing the erstwhile SEBI (Prohibition of Insider Trading) Regulations 1992. The regulations provide for code of conduct, communication or procurement of unpublished price information, initial and continual disclosures, institutional mechanism for prevention of insider trading etc.

2. Disclosure requirements in PIT Regulations

Regulation 7 of PIT Regulations provides for disclosures by certain persons such as promoters, members of the promoter group, Key Managerial Persons (KMP) and directors etc. --

(i) Initial disclosures by KMP, directors, etc. under regulation 7(1)

Every person on appointment as a key managerial personnel or a director of the company or upon becoming a promoter or member of the promoter group shall disclose his holding of securities of the company as on the date of appointment or becoming a promoter, to the company within seven days of such appointment or becoming a promoter.

The specified form for disclosure is Form B wherein the details of securities and details of open interest in derivatives held on the date of appointment of key managerial personnel (KMP) or director or upon becoming a promoter of a listed company and other such persons as mentioned in Regulation 6(2) is to be provided.

(ii) Continual disclosures by KMP, directors, etc. under regulation 7(2)

Every promoter, member of the promoter group, designated person and director of every company shall disclose to the company, the number of such securities acquired or disposed of within two trading days of such transaction if the value of the securities traded, whether in one transaction or a series of transactions over any calendar quarter, aggregates to a traded value in excess of ten lakh rupees or such other value as may be specified. For this purpose, Form C has been specified which covers details of change in holding of securities of promoter or employee or director of a listed company and other such persons as mentioned in Regulation 6(2). It also includes details of trading in derivatives on the securities of the company by promoter, member of the promoter group, designated person or director of a listed company and immediate relatives of such persons and other such persons as mentioned in Regulation 6(2)

SUBSCRIBE TaxPublishers.inSUBSCRIBE FOR FULL CONTENT

TaxPublishers.in

'Kedarnath', 7, Avadh Vihar, Near Nirali Dhani,

Chopasni Road

Jodhpur - 342 008 (Rajasthan) INDIA

Phones : 9785602619 (11 am - 5 pm)

E-Mail : mail@taxpublishers.in / mail.taxpublishers@gmail.com