SEBI on March 31, 2023 has issued Comprehensive FAQs on SEBI (PIT) Regulations, 2015. SEBI (PIT) Regulations, 2015 play a crucial role in preventing insider trading and ensuring transparency in the Indian securities market. To provide further clarity and address common queries, the Securities and Exchange Board of India (SEBI) has recently released a comprehensive set of Frequently Asked Questions (FAQs) on these regulations. In this blog post, we will explore the implications of these new FAQs and highlight some of the major changes introduced.
Here are some of the key points covered in the new FAQs:
- The definition of trading has been expanded to include activities such as the creation, invocation, or revocation of pledge. Additionally, gifting of shares is now treated as a form of trade under the regulations.
- Pledge-related Changes: Pledgor or pledgee can now create, invoke, or revoke pledges during the trading window closure period. However, they must demonstrate that the action was bona fide and establish their innocence in case of any regulatory scrutiny. The market value of the shares on the date of pledge or revocation should be considered for disclosure threshold calculations under Chapter III of the regulations.
- Disclosure Requirements for Transmission of Shares: The disclosure requirements under the PIT Regulations now apply to the transmission of shares as well.
- System Driven Disclosures: SEBI has mandated system-driven disclosures for members of the promoter group, designated persons, promoters, and directors of the company. However, immediate relatives of designated persons are not covered by this requirement as of now. Designated persons who are foreign nationals without a PAN or demat account are also exempt from system-driven disclosures.
- Incremental Transactions: Under the PIT Regulations, any incremental transactions exceeding a prescribed threshold of Rs 10 lakhs must be disclosed when the subsequent transactions cross this threshold, even if a previous disclosure has already been made. The disclosure should be based on the market value without subtracting brokerage or commission.
- Trading by Managing Directors: Managing directors of a company, who are in possession of Unpublished Price Sensitive Information (UPSI), can trade with pre-clearance alone. If they are not in possession of UPSI at the time of the trade and abide by the code of conduct, they do not need a trading plan.
- Exceptions to Contra-Trade Restrictions: Acquisition of securities through rights issues, follow-on public offers (FPOs), offers for sale (OFS), bonus issues, share splits, mergers/amalgamations, or demergers will not be subject to the restriction of ‘contra-trade.’ However, the initial transaction of disposal must have been completed in accordance with the PIT Regulations.
- Board Accountability for System Driven Disclosures: The board of all listed entities is responsible for maintaining system-driven disclosures physically or in the cloud, ensuring confidentiality, integrity, and security.
The new comprehensive FAQs on SEBI (PIT) Regulations, 2015 provide valuable insights into the regulatory framework surrounding insider trading in India. By addressing common queries and introducing key changes, SEBI aims to enhance transparency and promote fair practices in the securities market. Market participants and stakeholders should familiarize themselves with these regulations to ensure compliance and contribute to the integrity of the Indian capital markets.