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THE SECURITIES AND EXCHANGE BOARD OF INDIA (PROHIBITION OF INSIDER TRADING) REGULATIOS, 2015 – AN OVERVIEW

Corporate Laws / Banking / SEBI / LLP - By: - Mr. M. GOVINDARAJAN - Dated:- 22-4-2015 - In exercise of the powers conferred under Section 30 read with Section 11 (2)(g) of SEBI Act, 1992, the Board make the Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 2015 ( Regulations for short)- to put in place a framework for prohibition of insider trading in securities; and to strengthen the legal framework. The Regulations were notified by Notification No. LAD-NRO .....

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cted person as- any person who is or has during the six months prior to the concerned act been associated with a company, directly or indirectly, in any capacity including by reason of frequent communication with its officers or by being in any contractual fiduciary or employment relationship or by being a director, officer or an employee of the company or holds any position including a professional or business relationship between himself and the company whether temporary or permanent, that al .....

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cted persons as specified above; or a holding company or associate company or subsidiary company; or an intermediary or an employee or director thereof; or an investment company, trustee company, asset management company, or an employee or director thereof; or an official of a stock exchange or of clearing house or corporation; or a member of board of trustees of a mutual fund or a member of board of directors of asset management company of mutual funds or is an employee thereof; or a memb .....

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nsitive information as any information, relating to a company or its securities, directly or indirectly, that is not generally available which upon becoming generally available, is likely to materially affect the price of the securities and shall, ordinarily including but not restricted to, information relating to the following: financial results; dividends; change in capital structure; mergers, de-mergers, acquisitions, delistings, disposals and expansion of business and such other transact .....

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erformance of duties or discharge of legal obligations; No person shall procure from or cause the communication by any insider of unpublished price sensitive information, relating to a company or securities listed or proposed to be listed, except in furtherance of legitimate purposes, performance of duties or discharge of legal obligations; Communication of unpublished information Regulation 3(3) provides that an unpublished price sensitive information may be communicated, provided, allowed acc .....

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, unpublished price sensitive information is disseminated to be made generally available at least two trading days prior to the proposed transaction being effected in such form as the board of directors may determine; Agreements by Board of Directors Regulation 3(4) provides that the board of directors for the purposes of Regulation 3(3) shall require the parties to execute agreements to contract confidentiality and non disclosure obligations on the part of such parties and such parties shall ke .....

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emonstrating the circumstances including the following: the transaction is an off-market inter-se transfer between promoters who were in possession of the same unpublished price sensitive information without being in breach of Regulation 3 and both parties had made a conscious and informed trade decision; in the case of non individual insiders- the individuals who were in possession of such unpublished price sensitive information were different from the individuals taking trading decisions an .....

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lation 4(2) provides that in the case of connected persons, the onus of establishing that they were not in possession of unpublished price sensitive information, shall be on such connected persons and in other cases the onus is on the Board. Regulation 4(3) provides that the Board may specify such standards and requirements from time to time as it may deem necessary for the purpose of these regulations. Trading plans Regulation 5(1) provides that an insider shall be entitled to formulate a tradi .....

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ounced by the issuer of the securities and the second trading day after the disclosure of such financial results; entail trading for a period of not less than 12 months; not entail overlap of any period for which another trading plan is already in existence; set out either the value of trades to be effected or the number of securities to be traded along with the nature of the trade and the intervals at, or dates on which such trades shall be effected; an not entail trading in securities for .....

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the trading plan once approved shall be irrevocable. The insider shall mandatorily have to implement the plan without being entitled to either deviate from it or to execute any trade in the securities outside the scope of the trading plan. Despite the 6 month gap between the formulation of the trading plan and its commencement, the unpublished price sensitive information in possession of the insider is still not generally available. In such a situation, commencement of the plan would conflict w .....

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ll be made as specified in Schedule A as detailed below: prompt public disclosures of unpublished price sensitive information that would impact price discovery no sooner than credible and concrete information comes into being in order to make such information generally available; uniform and universal dissemination of unpublished price sensitive information to avoid selective disclosure; Designation of a senior officer as Chief investor relations officer to deal with dissemination of informat .....

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s of meetings with analysts and other investor relations conferences on the official website to ensure official confirmation and documentation of disclosures made; Handling of all unpublished price sensitive information on a need-to-know basis. Regulation 6(2) that the disclosures to be made by any person shall include those relating to trading by such person s immediate relatives, and by any other person for whom such person takes trading decisions. Regulation 6 (3) provides that the disclosur .....

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ures and disclosures by other connected persons. Regulation 7(1) provides for initial disclosures. It provides that every promoter, key managerial personnel and director of every company, whose securities are listed shall disclose his holding of securities of the company as on the date of these regulations taking effect to the company within 30 days of these regulations taking effect. Every person on appointment as a key managerial personnel or a director of the company or upon becoming a promot .....

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