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TMI BlogSecurities and Exchange Board of India (Prohibition of Insider Trading) (Amendment) Regulations, 2018X X X X Extracts X X X X X X X X Extracts X X X X ..... l be inserted at the end, namely:- "Explanation-For the purpose of this regulation, "financially literate" shall mean a person who has the ability to read and understand basic financial statements i.e. balance sheet, profit and loss account, and statement of cash flows." (b) in clause (h), the numbers "2009" shall be substituted with the numbers "2018" (c) after clause (h), following clause shall be inserted, namely:- "(ha) "proposed to be listed" shall include securities of an unlisted company: (i) if such unlisted company has filed offer documents or other documents, as the case may be, with the Board, stock exchange(s) or registrar of companies in connection with the listing; or (ii) if such unlisted company is getting listed pursuant to any merger or amalgamation and has filed a copy of such scheme of merger or amalgamation under the Companies Act, 2013; " (d) in clause (n), sub-clause (vi) shall be omitted. (2) in regulation 3,- (a) after sub-regulation (2), following sub-regulation shall be inserted, namely:- "(2A) The board of directors of a listed company shall make a policy for determination of "legitimate purposes" as a part of "Codes of Fair Disclosur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e stamping and audit trails to ensure non-tampering of the database." (3) in regulation 4,- (a) in sub-regulation (1), before the proviso, following explanation shall be inserted, namely:- "Explanation- When a person who has traded in securities has been in possession of unpublished price sensitive information, his trades would be presumed to have been motivated by the knowledge and awareness of such information in his possession;" (b) in sub-regulation (1), in proviso, in clause (i), the word "promoters" shall be substituted with the word "insiders" (c) in sub-regulation (1), in proviso, in clause (i), following proviso shall be inserted, namely:- "Provided that such unpublished price sensitive information was not obtained under sub-regulation (3) of regulation 3 of these regulations." (d) in sub-regulation (1), in proviso, in clause (i), after the proviso following proviso shall be inserted, namely:- "Provided further that such off-market trades shall be reported by the insiders to the company within two working days. Every company shall notify the particulars of such trades to the stock exchange on which the securities are listed within two trading days from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sub-regulation (1), the following explanation shall be inserted, namely:- "Explanation-For the avoidance of doubt it is clarified that intermediaries, which are listed, would be required to formulate a code of conduct to regulate, monitor and report trading by their designated persons, by adopting the minimum standards set out in Schedule B with respect to trading in their own securities and in Schedule C with respect to trading in other securities." (c) in the Note to sub-regulation (1), (i) the word "market intermediary" shall be substituted with the word "intermediary". (ii) the words "its employees" shall be substituted with the words "designated persons and their immediate relatives" (iii) the word "schedule" shall be substituted with the word "schedules". (d) sub-regulation (2), shall be substituted with following words, namely:- "The board of directors or head(s) of the organisation, of every other person who is required to handle unpublished price sensitive information in the course of business operations shall formulate a code of conduct to regulate, monitor and report trading by their designated persons and immediate relative of designated persons towards a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... investment companies for intermediaries or fiduciaries; (iv) Chief Executive Officer and employees upto two levels below Chief Executive Officer of such listed company, intermediary, fiduciary and its material subsidiaries irrespective of their functional role in the company or ability to have access to unpublished price sensitive information; (v) Any support staff of listed company, intermediary or fiduciary such as IT staff or secretarial staff who have access to unpublished price sensitive information." (7) after regulation 9, a new regulation 9A shall be inserted, namely:- "Institutional Mechanism for Prevention of Insider trading. 9A. (1) The Chief Executive Officer, Managing Director or such other analogous person of a listed company, intermediary or fiduciary shall put in place adequate and effective system of internal controls to ensure compliance with the requirements given in these regulations to prevent insider trading. (2) The internal controls shall include the following: a) all employees who have access to unpublished price sensitive information are identified as designated employee; b) all the unpublished price sensitive information shall be identifie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -regulation (2)" shall be omitted. (b) in the recital, after the word "Conduct" and before the word "to", the words "for Listed Companies" shall be inserted. (c) in the recital, the word "Insiders" shall be substituted with the words "Designated Persons". (d) in clause (1), after the word "directors" and before full stop, the words ", but not less than once in a year" shall be inserted. (e) in clause (2), the words "the insider's" and "his" shall be omitted. (f) in clause (3), the words "Employees and connected persons designated on the basis of their functional role ("Designated persons")" shall be substituted with the words "Designated Persons and immediate relatives of designated persons". (g) in clause (3), the words "The board of directors shall in consultation with the compliance officer(s) specify the designated persons to be covered by such code on the basis of their role and function in the organisation. Due regard shall be had to the access that such role and function would provide to unpublished price sensitive information in addition to seniority and professional designation" shall be omitted. (h) in clause (4), after the word "closed." foll ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion-The term "material financial relationship" shall mean a relationship in which one person is a recipient of any kind of payment such as by way of a loan or gift during the immediately preceding twelve months, equivalent to at least 25% of such payer's annual income but shall exclude relationships in which the payment is based on arm's length transactions." (u) after clause (14), a new clause (15) shall be inserted, namely:- "15. Listed entities shall have a process for how and when people are brought 'inside' on sensitive transactions. Individuals should be made aware of the duties and responsibilities attached to the receipt of Inside Information, and the liability that attaches to misuse or unwarranted use of such information." (9) after SCHEDULE B, SCHEDULE C shall be inserted, namely:- "SCHEDULE C [See sub-regulation (1) and sub-regulation (2) of regulation 9] Minimum Standards for Code of Conduct for Intermediaries and Fiduciaries to Regulate, Monitor and Report Trading by Designated Persons 1. The compliance officer shall report to the board of directors or head(s) of the organisation (or committee constituted in this regard) and in particular, shall provide repor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for reasons to be recorded in writing provided that such relaxation does not violate these regulations. Should a contra trade be executed, inadvertently or otherwise, in violation of such a restriction, the profits from such trade shall be liable to be disgorged for remittance to the Board for credit to the Investor Protection and Education Fund administered by the Board under the Act. Provided that this shall not be applicable for trades pursuant to exercise of stock options. 9. The code of conduct shall stipulate such formats as the board of directors or head(s) of the organisation (or committee constituted in this regard) deems necessary for making applications for pre-clearance, reporting of trades executed, reporting of decisions not to trade after securing pre-clearance, and for reporting level of holdings in securities at such intervals as may be determined as being necessary to monitor compliance with these regulations. 10. Without prejudice to the power of the Board under the Act, the code of conduct shall stipulate the sanctions and disciplinary actions, including wage freeze, suspension, recovery, clawback etc., that may be imposed, by the intermediary or fiduciary r ..... X X X X Extracts X X X X X X X X Extracts X X X X
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