SEBI (Prohibition of insider trading) Regulations 2015

SEBI (PROHIBITION OF INSIDER TRADING), REGULATIONS 2015 1 Objective Withtheobjectofbringingthebasicframeworkgoverningthe regimeofinsidertradingpracticesinlinewiththedynamic globalscenarioandtotightenthegapsofexistingnorms,SEBI hasnotifiedthenewPITRegulationtoberenownedasSEBI (Prohibitionofinsidertrading)Regulation,2015on15thJanuary, 2015.Theseregulationswillbeeffectivew.e.f15thMay2015. 2 What is Insider Trading? InsiderTradingistrading/dealingofacompany'sstockbyan insider/connectedpersononthebasisofUnpublishedPrice SensitiveInformation. 3 Who is Insider? TheRegulationsalsointendtobringinitsambitpersonswho mayseeminglynotoccupyanypositioninacompanybutarein regulartouchwiththecompany&itsofficers&haveaccessto itsinternalnittygritties. OR 4 Connected Person With Detailed Clarification... FollowingshallbeConnected/Deemedtobeconnectedwiththe Company: Anypersonwhoisorhasbeenassociatedwithcompany,inany manner,duringthesixmonthspriortotheconcernedact; Animmediaterelativeoftheconnectedperson; Aholding/associate/subsidiarycompany; Anofficialofstockexchangeorofclearingcorporation; Abankerofthecompany; Aconcern,firm,trust,HUF,companyorAOPwhereinadirector ofacompany/immediaterelative/bankerofcompany,hasmore than10%oftheholdingorinterest; 5 What includes Trading? Trading means and includes:- Subscribing; Buying; Selling; Dealing; Agreeing to buy, sell, subscribe, deal in any securities; 6 Unpublished Price Sensitive Information (UPSI) Anyinformation,relatingtoacompanyoritssecurities,thatis notgenerallyavailable,andislikelytomateriallyaffectthe priceofthesecuritiesisaUPSI It includes:- Financial results; Dividends; Change in capital structure; Mergers, de-mergers, acquisitions, delisting and such other transactions; Changes in KMPs; Material events in listing Regulations; 7 Who will Monitor ? TheRegulationshavecastedmajorresponsibilityfor monitoring&implementingthecodesspecifiedinthese RegulationsupontheComplianceOfficer; ComplianceOfficermeansanyseniorofficer,designatedso andreportingtotheBoardofDirector,whoisfinancially literateandwell-versedwithlegal®ulatorycompliances; He/sheshallberesponsibleforcomplianceofpolicies, procedures,maintenanceofrecords,monitoringadherenceto therulesforthepreservationofunpublishedpricesensitive information,monitoringoftradesandtheimplementationof thecodesspecifiedintheseregulationsundertheoverall supervisionoftheboardofdirectorsofthelistedcompany; 8 exceptions thereto... Noinsidershallcommunicate,provideorallowaccesstoany UPSI,toanypersonincludingotherinsiders,however,thereare certainexceptionstothis: Exceptforperformanceofduties,forlegitimatebusiness purposes&onaneedtoknowbasis.: UPSImaybecommunicatedinconnectionwithanopenoffer underthetakeoverregulations,wheretheBoardofDirectorisof theviewthattheproposedtransactionisinthebestinterestof thecompany; Iftheproposedtransactiondoesnotentailanopenoffer,then theBoardofDirectorsshalldisseminatetheUPSIatleast2 tradingdayspriortotheproposedtransaction; 9 Defencesavailable to an Insider THEONUSOFPROVINGTHEINNOCENCELIESONTHE INSIDER Contractconfidentiality&Non-disclosureagreementshasbeen executed; Thetransactionisanoff-marketinter-setransferbetween promoters; Incaseofnon-individualinsiders: IndividualswhowereinpossessionofsuchUPSIweredifferent fromtheindividualstakingdecisions; Appropriate&adequatearrangementswereinplacetoensure thatRegulationsarenotviolated; Tradeswerepursuanttoatradingplan; 10 Code of conduct 11 Code of Fair Disclosure, Schedule A ......a new concept SomeimportantcontentsofthisCodeare: Uniform&universaldisseminationofUPSItoavoidselective disclosure; Designationofaseniorofficerasachiefinvestorrelations officertodealwithdisseminationofinformation&disclosureof UPSI; Appropriate&fairresponsetoqueriesonnewreports&requests forverificationofmarketrumoursbyregulatoryauthority; Ensuringthatinformationsharedwithanalysts84research personnelisnotUPSIAndmore..... 12 Code of Conduct, Schedule B CodeofConductcarryinginternalguidelinesfortradingby insidershasbeenapprovedandadoptedbytheBoardof DirectorsattheBoardMeetingheldon1stMay,2015effective from15thMay,2015. Itregulates,monitorsandreporttradingbyitsemployeesand otherconnectedpersonstowardsachievingcompliancewith theseregulationsadoptingtheminimumstandardssetoutin ScheduleBtotheseregulations,withoutdilutingtheprovisions oftheseregulationsinanymanner. DesignatedemployeesandIntermediariesarerequiredtofollow theCodeofconductframedbythecompany. 13 DISCLOSURES Types of Disclosure WhatByToTime limit INITIAL DISCLOSER HoldinginthecompanyPromotor, KMP,or Directorof thelisted company CompanyWithin30daysof theseregulation takingeffect Holdingonthedateof appointment Promotor, KMP,or Director CompanyWithin7daysof suchappointment CONTINUAL DISCLOSURES Valueofsecuritiestradedin aggregateinacalendar quarter,exceedstraded valueofRs10Lacorany othervalueasmaybe prescribed Promotor, Director,or Employee CompanyWithin2daysof suchtransaction CompanyStock exchange Within2daysof receiptsof disclosure 14 DISCLOSURES Types of Disclosure WhatByToTime limit Disclosureby otherconnected person AsRequiredbythe company Connected person CompanyAsspecifiedby thecompany 15 Penalties AnycontraventionoftheseRegulationsshallbedealtwithby SEBIinaccordancewiththeSEBIandcompaniesAct2013. MONETARYPENALTY:Section15GoftheActimposespenaltyof atleastRs10Lacs,whichmayextendtoRs.25Croreorthree timesofprofitsmadeoutofinsidertrading,whicheverishigher. IMPRISONMENT:Section24ofSEBIActevengoestotheextent ofimprisonmentupto10yearsorfineuptoRs.25Crore,orboth, foranyoffencespertainingtocontraventionoftheprovisionsof theAct. 16 Case Law InthecaseofHindustanLeverLtd.(HLL)andBrookeBondLipton IndiaLtd.(BBLIL)werecompaniescontrolledbyUniliverInc.On appealbyHLLtotheAppellateAuthority,UPSIinvolvedsince priortotheannouncementofthemerger,leadingfinancial newspapershadreportedandsoitcouldnotallegethatthe informationwasundisclosedandAsafalloutofthiscaseSEBI amendeditsRegulationsinspeculativereportsinthemedia wouldnotbetreatedaspublicationofpricesensitiveinformation, asreferredtoindefinition2(k)ofamendedregulations2002. InthecaseofManappuramFinanceVSEBI,Chargesformthe directorofRs10lakhforviolationofinsidertradingduetonot obtainingthePre-clearance. 18 Case Law IndustryleaderandbioconchiefkiranMazumdarshawtodaysaid theseruleshave“draconianintent”andwillkilltheESOPs. SEBIhaschargedAvellayan,achairmanofMurugappaGroup,one ofindia’sleadingbusinessconglomeratesandthreeother individualwithinsidertrading SEBIordersimpoundingofRs.2.15Crininsidertradingcaseand SEBIfoundthatGopalkrishanCandVKaruppiahhadallegedly tradedinthescriptofsaberoorganicGujaratonthebasisofUPSI 18