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SEBI Act, 1992--InsiderTrading

SEBI--Overview of Revised Disclosure Formats inInsider Trading Regulations

CA. Jyoti Jain

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

1. Insider trading

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ofinformation resulting in one party to the transaction having advantage over theother party by reason of his having unpublished price sensitive information.Such trading is called insider trading.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place whenthe insiders or other persons who, by virtue of their position in the office orotherwise, have access to the unpublished price sensitive information relatingto the affairs of a company, and deal in securities of such company or causethe trading of securities of such company or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

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 The regulations provide for code of conduct,communication or procurement of unpublished price information, initial andcontinual disclosures, institutional mechanism for prevention of insidertrading etc.

2. Disclosure requirements in PIT Regulations

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

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

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

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

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

Every promoter, member of the promoter group, designatedperson and director of every company shall disclose to the company, the numberof such securities acquired or disposed of within two trading days of suchtransaction if the value of the securities traded, whether in one transactionor a series of transactions over any calendar quarter, aggregates to a tradedvalue in excess of ten lakh rupees or such other value as may be specified. Forthis purpose, Form C has been specified which covers details of change in holdingof securities of promoter or employee or director of a listed company and othersuch persons as mentioned in Regulation 6(2). It also includes details oftrading in derivatives on the securities of the company by promoter, member ofthe promoter group, designated person or director of a listed company andimmediate relatives of such persons and other such persons as mentioned in Regulation6(2)

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