Securities and Exchange Board of India (SEBI) has issued the Securities and Exchange Board of India (Prohibition of Insider Trading) (Second Amendment) Regulations, 2024, effective from the ninetieth day after its publication in the Official Gazette. These regulations amend the existing provisions under the Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 2015.
Key amendments include adjustments to trading restrictions, where the period between the end of a financial quarter and the declaration of results is now defined as one hundred and twenty calendar days instead of six months. Additionally, changes have been made to trading plans, specifying parameters such as trade value, nature, execution timing, and price limits. These amendments aim to enhance transparency and compliance in insider trading practices.
Further amendments address procedural aspects such as approval of trading plans by compliance officers within two trading days and the handling of non-implementation of plans due to unforeseen circ*mstances. These updates are intended to strengthen governance and accountability in securities trading, ensuring fair practices and investor protection under SEBI’s regulatory framework.
SECURITIES AND EXCHANGE BOARD OF INDIA
NOTIFICATION
Mumbai, the 25th June, 2024
SECURITIES AND EXCHANGE BOARD OF INDIA (PROHIBITION OF INSIDER TRADING) (SECOND AMENDMENT) REGULATIONS, 2024
No. SEBI/LAD-NRO/GN/2024/184—In exercise of the powers con-ferred by section 30 read with clause (g) of sub-section (2) of section 11 and clauses (d) and (e) of sec-tion 12A of the Securities and Exchange Board of India Act, 1992 (15 of 1992), the Board hereby makes the following regulations to further amend the Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 2015, namely: —
1. These Regulations may be called the Securities and Exchange Board of India (Prohibition of Insider Trading) (Second Amendment) Regulations, 2024.
2. They shall come into force on the ninetieth day from the date of their publication in the Official Ga-zette.
3. In the Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 2015, –
I. in regulation 5, in sub-regulation (2),
(1) in clause (i),
(a) the words “six months” shall be substituted by the words “one hun-dred and twenty calendar days”;
(b) in the note, the words “six months” shall be substituted by the words “one hundred and twenty calendar days”;
(c) in the note, the words “Such a” shall be substituted by the words and symbols “Companies declare their results quarterly and there exists a trading restriction, in terms of these Regulations, from quarter end to two days after declaration of quarterly result, which, it is seen, is generally a period of around one month for most companies. Thus, one hundred and twenty calendar days”.
(2) clause (ii) and the note thereto shall be omitted;
(3) clause (iii) and the note thereto shall be omitted;
(4) in clause (v),
(a) the words and symbols “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; and” shall be substituted by the following, namely: –
“set out following parameters for each trade to be executed:
(i) either the value of trade to be effected or the number of securities to be traded;
(ii) nature of the trade;
(iii) either specific date or time period not exceeding five consecutive trading days;
(iv) price limit, that is an upper price limit for a buy trade and a lower price limit for a sell trade, subject to the range as specified below:
a. for a buy trade: the upper price limit shall be between the closing price on the day before submission of the trading plan and upto twenty per cent higher than such clos-ing price;
b. for a sell trade: the lower price limit shall be between the closing price on the day before submission of the trading plan and upto twenty per cent lower than such closing price.
Explanation:
(i) While the parameters in sub-clauses (i), (ii) and (iii) shall be mandatori-ly mentioned for each trade, the parameter in sub-clause (iv) shall be optional.
(ii) The price limit in sub-clause (iv) shall be rounded off to the nearest numeral.
(iii) Insider may make adjustments, with the approval of the compliance officer, in the number of securities and price limit in the event of corporate actions related to bonus issue and stock split occurring after the approval of trading plan and the same shall be notified on the stock exchanges on which securities are listed.”
(b) in the note, the word “intervals” shall be substituted by the word “period”;
(c) in the note, after the words and symbol “may be set out in the plan.”, the words and symbol “However, there should be an outer limit on the duration of the time period, so that while it allows the insider to split their trades across different dates, duration should not be so long that it is prone to misuse.
Further, to protect the insider from unexpected price movements, he may, at the time of formulation of trading plan, provide price limits within the range specified in these Regulations.” shall be inserted.
II. in regulation 5, in second proviso to sub-regulation (3), the words “and restrictions on contra trade” shall be omitted.
III. in regulation 5, in sub-regulation (4),
(1) the words “deviate from it or to” shall be omitted;
(2) after the words “outside the scope of the trading plan” and before the symbol “.”, the words “or to deviate from it except due to permanent incapacity or bankruptcy or operation of law”, shall be inserted;
(3) in the proviso, the words and symbols “and in such event the compli-ance officer shall confirm that the commencement ought to be deferred until such unpublished price sensitive information becomes generally available information so as to avoid a violation of sub-regulation (1) of regulation 4” shall be omitted;
(4) after the existing proviso thereto, the following proviso and Explana-tion shall be inserted, namely: –
“Provided further that if the insider has set a price limit for a trade under sub-clause (iv) of clause (v) of sub-regulation 2, the insider shall execute the trade only if the execution price of the security is within such limit. If price of the security is outside the price limit set by the insider, the trade shall not be executed.
Explanation: In case of non-implementation (full/partial) of trading plan due to either reasons enumerated in sub-regulation 4 or failure of execution of trade due to inadequate liquidity in the scrip, the following procedure shall be adopted:
(i) The insider shall intimate non-implementation (full/partial) of trading plan to the compliance officer within two trading days of end of tenure of the trading plan with reasons thereof and supporting documents, if any.
(ii) Upon receipt of information from the insider, the compliance officer, shall place such information along with his recommendation to accept or reject the submissions of the insider, before the Audit Committee in the immediate next meeting. The Audit Committee shall decide whether such non-implementation (full/partial) was bona fide or not.
(iii) The decision of the Audit Committee shall be notified by the compli-ance officer on the same day to the stock exchanges on which the securities are listed.
(iv) In case the Audit Committee does not accept the submissions made by the insider, then the compliance officer shall take action as per the Code of Conduct.”;
(5) in the note, after the words “market have assessed their views on the securities” and before the symbol “.”, the words “except in situations beyond the control of the insider” shall be inserted;
(6) in the second paragraph of the note,
(a) after the word “the” and before the word “proviso”, the word “first” shall be inserted;
(b) the words “six months” shall be substituted by the words “one hun-dred and twenty calendar days”;
(c) the words “commencement of execution of the trading plan ought to be deferred” shall be substituted by the words “execution of the trading plan should not be com-menced.”;
(7) after the second paragraph of the note, the following paragraph shall be inserted, namely: –
“The second proviso is intended to address the scenario where the insid-er has set a price limit for a trade and due to adverse fluctuation in market prices, the price of the securi-ty is outside the price limit set by the insider, the trade shall not be executed. However, if the insider wishes to trade irrespective of the fluctuation in market price, he may not set any price limit at the time of formulation of the trading plan.”
IV. in regulation 5, sub-regulation (5) shall be substituted by the follow-ing, namely: –
“The compliance officer shall approve or reject the trading plan within two trading days of receipt of the trading plan and notify the approved plan to the stock exchanges on which the securities are listed, on the day of approval.”.
BABITHA RAYUDU, Executive Director
[ADVT.-III/4/Exty./200/2024-25]
Footnote:
1. The Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 2015 was published in the Gazette of India on January 15, 2015 vide No. LAD-NRO/GN/2014-15/21/85.
2. The Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 2015 was subsequently amended on, –
i. December 31, 2018 by the Securities and Exchange Board of India (Prohibition of Insider Trading) (Amendment) Regulations, 2018 vide No. SEBI/LAD-NRO/GN/ 2018/59.
ii. January 21, 2019 by the Securities and Exchange Board of India (Pro-hibition of Insider Trading) (Amendment) Regulations, 2019 vide No. SEBI/LAD-NRO/GN/ 2019/02.
iii. July 25, 2019 by the Securities and Exchange Board of India (Prohibi-tion of Insider Trading) (Second Amendment) Regulations, 2019 vide No. SEBI/LAD-NRO/GN/ 2019/23.
iv. September 17, 2019 by the Securities and Exchange Board of India (Prohibition of Insider Trading) (Third Amendment) Regulations, 2019 vide No. SEBI/LAD-NRO/GN/ 2019/32.
v. July 17, 2020 by the Securities and Exchange Board of India (Prohibi-tion of Insider Trading) (Amendment) Regulations, 2020 videNo. SEBI/LAD-NRO/GN/ 2020/23.
vi. October 29, 2020 by the Securities and Exchange Board of India (Pro-hibition of Insider Trading) (Second Amendment) Regulations, 2020 vide No. SEBI/LAD-NRO/GN/ 2020/38.
vii. April 26, 2021 by the Securities and Exchange Board of India (Prohi-bition of Insider Trading) (Amendment) Regulations, 2021 vide No. SEBI/LAD-NRO/GN/ 2021/17.
viii. August 05,2021 by the Securities and Exchange Board of India (Pro-hibition of Insider Trading) (Second Amendment) Regulations, 2021 vide No. SEBI/LAD-NRO/GN/ 2021/37.
ix. November 24, 2022 by the Securities and Exchange Board of India (Prohibition of Insider Trading) (Amendment) Regulations, 2022 vide No. SEBI/LAD-NRO/GN/2022/108.
x. May 17, 2024 by the Securities and Exchange Board of India (Prohibition of Insider Trading) (Amendment) Regulations, 2024 vide No. SEBI/LAD-NRO/GN/2024/181.
