Shajathali S
Introduction
In the interest of general public, fair trading in securities markets and to prohibit insider trading in corporates and other organizations, Securities and Exchange Board of India (SEBI) has enacted SEBI (Prohibition of Insider Trading) Regulations, 2015, (hereafter referred to as "PIT regulations") which sets clear rules and procedures for dealing in securities by the Promoters, Directors, Key Managerial Personnel (KMP) and other Designated Persons those who have access to Unpublished Price Sensitive Information(UPSI – information which is not published, but which may affect the share price when it gets published) in an Organisation.
What is Structured Digital Database as per PIT Regulations?
Structured Digital Database (SDD) is a Digital Database which,
- Should be maintained internally by the company
- Should be maintained with adequate internal checks, time stamping and audit trails
- Should be non-tamperable
- Should not be outsourced
- Containing the details such as, name of persons with whom the UPSI have been shared with, name of persons for whom there is an access to UPSI, PAN of those persons or any other Identification number authorized by Law
In general, SDD is a kind of Digital Database which should be maintained internally in a non-tamperable manner along with time-stamping and audit trail. The Database must contain the name and PAN number of Persons with whom the UPSI have been shared.
Ref: Regulation 3(5) of SEBI (Prohibition of Insider Trading) Regulations, 2015.
What are all the information that can be considered as UPSI?
Unpublished price sensitive information means any information, relating to a company or its securities, directly or indirectly, that is not generally available which upon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, de-listings, disposals and expansion of business and such other transactions
- Changes in key managerial personnel
In general, any information which is unpublished, but have an impact on the securities of the company upon getting published to the general public is an Unpublished Price Sensitive Information.
Ref: Regulation 2(n) of SEBI (Prohibition of Insider Trading) Regulations, 2015.
Who should maintain SDD?
The board of directors or head(s) of the organization should ensure that the unpublished price sensitive information is maintained in their respective organization. Company Secretary or Compliance Officer can maintain the database. The Board can authorize any person internally to maintain the Database but ensure that the information of those who are maintaining the Database is also getting captured in the Database, as they have access to UPSI.
How long SDD should be preserved for?
SDD should be preserved for a period of not less than eight (8) years after completion of the relevant transactions and in the event of receipt of any information from the Securities and Exchange Board of India regarding any investigation or enforcement proceedings, the relevant information in the structured digital database shall be preserved till the completion of such proceedings in addition to the above said 8 years.
What is the use of SDD?
SDD is used to keep record of persons with whom the price sensitive information or UPSI have been shared with. This Database will act as a check for those persons who have possession of UPSI, from dealing in securities in a manner for their personal gain by using the unpublished information. This Database can also help as an evidence in case of any investigation relating to violation of insider trading norms.
What are the consequences of not maintaining SDD?
The Stock Exchanges from August 4, 2022, have mandated the filing of Compliance Certificate by Compliance Officer of Listed entity which gives a certification regarding the maintenance of SDD in their respective Organizations.
If any insider who,
- either on his own behalf or on behalf of any other person, deals in securities of a body corporate listed on any stock exchange on the basis of any unpublished price sensitive information; or
- communicates any unpublished price sensitive information to any person, with or without his request for such information except as required in the ordinary course of business or under any law
- counsels, or procures for any other person to deal in any securities of any body corporate on the basis of unpublished price sensitive information, shall be liable to a penalty which shall not be less than ten lakh rupees but which may extend to twenty-five crore rupees or three times the amount of profits made out of insider trading, whichever is higher.
Ref: Section 15G of SEBI Act, 1992.
How to Maintain the SDD?
SDD should be maintained as,
- A Digital Database format
- In a non-tamperable manner
- With Time-stamping and Audit Trail facility
- Must not able to edit or erase the contents once added
- Should be accessible only by authorized persons
- Not a public data subject to regulatory requirements
- Should be maintained internally
- Should not be outsourced
Can SDD be maintained in Excel sheet, word file or pdf file?
No, SDD can not be maintained in Excel, word or pdf file format as there is a chance for tampering and editing the data. It must be maintained in a specific Database software which consist of features such as Non-tamperable, Time-stamping and Audit trail which allows the database to capture the changes along with the date and time whenever the data gets added or edited.
Format for maintaining SDD
There is no specific format given in regulations for maintaining SDD. By complying with regulation 3(5) of SEBI (Prohibition of Insider Trading) Regulations, 2015, the below mentioned format is advisable:
|
STRUCTURED DIGITAL DATABASE |
||||||||||
|
S. No |
Nature of UPSI |
Information Unpublished |
Date of Identification |
Designated persons with whom it is shared with or has access to |
PAN of Designated Person |
Date and Time of sharing or access |
Reasons of sharing |
Name and PAN of any other person or entity whom the UPSI is shared with |
Expected date of publication of UPSI |
Remarks if any |
Conclusion
Though there are regulations which prescribes many procedures to be followed by the company, there must be a familiarization programme for all the directors and other designated persons those who handle UPSI to make them understand the real impact and their own responsibilities in handling the price sensitive information. The threshold for trading of securities by promotors must be clearly defined in the Code of Conduct as per Regulation 9(1) of SEBI(Prohibition of Insider Trading) Regulations, 2015 read with Schedule B. All the persons who are handling UPSI must be aware of the Closure of Trading window and their trades should be subject to the pre-clearance by Compliance Officer of the Company.
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