Insider trading is an illegal way of buying or selling a security. It is generally practised in breach of a fiduciary duty or other relationship of trust and confidence, on the basis of material, nonpublic information about the security. Insider trading infringements often include tipping of important pieces of information and securities trading by the person tipped and those who steal such information. Some examples of insider trading are, corporate administrators and employees who traded the securities after receiving significant or confidential information about corporate developments and friends, business associates, family members, and other tippees of such officers and employees, who traded the securities after receiving such information.
Previously, in December 2015 the Security and Exchange Board of India(SEBI) had notified SDD in the first phase shall pertaining to acquisition and disposal of equity shares by promoters or group of prompters based on specified thresholds under the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, PIT Regulations and pledge of equity shares by promoters or group of promoters group. After that, the next phase of SDD was implemented in May 2018 for disclosure under Reg 29(1) and 29(2) of SAST Regulations under Reg. 7(2) of PIT Regulations. According to Regulation 7(2) of PIT Regulations, every promoter, member of the promoter group, designated person and director of every company are required to disclose to the transaction related to the acquisition or disposal of securities if the value of such transaction, either individually or combined value of series of transactions exceed ten lakh rupees for any quarter of the year, within two trading days. Companies are also required to disclose information about such transactions to the stock exchange on whose platform the securities of such company are listed, within two trading days of receipt of the disclosure of such information. In its recent circular, SEBI has implemented the System Driven Disclosures in phases, under SEBI (Prohibition of Insider Trading) Regulations, 2015 for automation of continual disclosure. The key points of the circular are discussed below.
Implementation of System Driven Disclosure: System Driven Disclosures has been implemented for members of and designated persons of the promoter group in addition to the promoters and director of the company under Regulation 7(2) of PIT Regulations. The disclosures for Equity and Equity Derivative segments are being displayed on the exchange Website under ‘System Driven Disclosures’.
Inclusion of listed Debt Securities: SEBI has decided to include the listed debt securities of equity listed companies under the range of the System Driven Disclosures for the entities mentioned in Para 2 above. Also, the method for implementation of System Driven Disclosures will also be applicable to listed Debt Securities.
Guidelines Depositories and Stock Exchanges: The Depositories and Stock Exchanges should make important arrangements such that the disclosures related to listed Debt Securities along with equity shares and equity derivative instruments are broadcasted on the websites of stock exchanges.
The automated process of generating disclosures under PIT Regulation will be helpful in cases of late filing of disclosures by the Entities or the listed corporates. This process will also enable transparency and integrity in the trading activities of Entities. SEBI wants to achieve its aim to create a centralized database system by implementing such a process, to protect the interests of investors in securities and promote the development and the regulation of the securities market.
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