The Rights of the Deceased: Moral Rights Incidental to Copyright Law
- Vanshika Agrawal
- 2024-04-25
AMENDMENT IN SEBI REGULATION vide its notification date 17 July 2020 notify the amendment in the Prohibition of Insider Trading Regulation, Amendment 2020 (“PIT”). This is not the first time SEBI has amended the PIT Regulations. SEBI sought to bring changes and clarity in the PIT regulations through amendments made in 2018 and 2019 and now again in 2020.
This article seeks to provide a detailed overview and understanding of the amendments brought in by SEBI in PIT regulations.
Contents hide
1 Key Amendments under the Prohibition of Insider Trading Regulation, Amendment 2020
1.1 (a) Development in the structured database
1.2 (b) Maintenance of Structured Data Base for 8 years
1.3 (c) Reporting of Violations of the Code of Conduct
1.4 (d) Certain Transactions exempted from the trading window restrictions.
The Amendments In Sebi Regulation has brought in changes in the PIT Regulations such as: a). Development in the structured database to maintain and store all the details of the person. Holding/accessing any unpublish Price Sensitive Information (hereinafter referred to as UPSI). b) Change in the authority for disclosure violations of Code of Conduct by listed companies, intermediaries and fiduciaries.
c) Introduction of certain transactions to be exempted from the trading window restrictions. Each of these changes is explained in detail below:
Under Amendments In Sebi Regulation (3) sub-regulation (5) of the PIT regulation, the Board of Directors of every Company is required to maintain a structured database whenever UPSI is shared with another person [i]. The database would record the name and PAN number (or any other identifier in case there isn’t a PAN number) of the recipient of UPSI.
However, the regulation raised many concerns and queries. With respect to the data to be maintain in respect of intermediaries or fiduciaries. Who were usually the UPSI recipient that the Company would interact with and share data. In pursuance of the same, SEBI in its FAQs published in 2019[ii], clarified that the companies shall maintain records and details of all the recipients including intermediaries and fiduciaries whereas, the intermediaries and fiduciaries shall maintain a separate record of individuals having access to UPSI.
Under the amendment, an attempt has made by SEBI to improve the existing system of structure database under Regulation 3.
The amendment extends the requirement to all individuals/entities having access to UPSI including intermediaries and fiduciaries.
Therefore, when a list company share UPSI to a merchant banker during the engagement of its service, the merchant banker is also required to maintain a record in the database under the new amendment. Further, the amendment also require submitting the nature of UPSI and the name of the person who has share the UPSI.
Therefore, SEBI through this amendment seeks to identify that specific person who has shared the UPSI and the nature of the UPSI shared by that person. [iii]
Moreover, most of the listed companies opt to monitor PIT regulations through an online platform or RTAs. However, the amendment mandates all the companies to maintain records internally and disallows the same to outsource.
Under regulation (3) sub-regulation (5), SEBI mandates every listed company to store the database for 8 years after the completion of the transaction. This amendment is provided in alignment with SEBI (Listing Obligations and Disclosure Requirements) 2015 [iv] and Section 128 of the Companies Act, 2013[v].
This regulation is provide to avoid any hurdles. That SEBI may face during an investigation in respect of violation under the PIT Regulations.
As a violation of the Code of Conduct is considered a serious act that can cause major financial loss or otherwise to list companies and investors, SEBI has sought to make the provisions for the same mandatory to ensure timely and accurate reporting of all violations.
In the matter of Adlabs Films Ltd[vi], SEBI held that violation of Code of Conduct amounts to insider trading and since then the regulation of the Code of Conduct has been incorporated in the PIT regulations. In 2019, SEBI prescribed the format and procedure for reporting violations of the Code of Conduct.
The new amendment in sebi regulations has slightly modified the format for reporting any violation as opposed to the format provided in 2019 and further mandates all the listed companies, intermediaries, and fiduciaries to report such violations to the stock exchange and not the securities regulator anymore.
However, the amendment fails to provide clarity with respect to the mechanism of disclosure to the stock exchange and if the same shall be disclosed to the public.
It is pertinent to note here that the previous regulation do not require the entities to publish the same in the public domain.
SEBI in its 2019 amendment to the PIT Regulations that provide an indicative list under Schedule B which contain transaction to be exempte from trading window restriction.
However, this list was indicative and could not extend to include transactions.
The new amendment has provided for additional categories of transaction. That SEBI might consider as an exception to the trading window restrictions.
The amendment in Sebi regulation of 2020 provide clarity to the existing regulation under the PIT regulation and further provide for better report and storing of the UPSI.
With each of these amendments, the compliance for the listed companies, intermediaries and fiduciaries shall also increase.
Although a step forward, the amendment’s success largely depend on the implementation and more importantly, the list entitiy and the other relevant parties’ efforts to adhere to their responsibility to comply with the regulations.
[i] sebi.gov.in/legal/regulations/jul-2020/securities-and-exchange-board-of-india-prohibition-of-insider-trading-amendment-regulations-2020_47104.html
[ii] https://www.sebi.gov.in/enforcement/clarifications-on-insider-trading/nov-2019/faqs-on-sebi-pit-regulations_44861.html
[iii] https://www.sebi.gov.in/legal/regulations/jul-2020/securities-and-exchange-board-of-india-prohibition-of-insider-trading-amendment-regulations-2020_47104.html
[iv] The list entity shall have a policy for preservation of document, approve by its board of directors, classifying them in at least two category as follow-
(a) documents whose preservation shall be permanent in nature;
(b) documents with preservation period of not less than eight years after completion of the relevant transactions:
Provided that the listed entity may keep documents specified in clauses (a) and (b) in electronic mode.”
[v] Section 128(5), Companies Act, 2013: “(5). The book of account of every company relating to a period of not less than eight financial year immediately preceding a financial year.
Or where the company has been in existence for a period less than eight years, in respect of all the preceding years together with the voucher relevant to any entry in such book of account shall be keep in good order”
[vi] Adjudication Order in respect of Shri Manmohan Shetty in the Matter of Adlabs Films Ltd. dated June 9, 2010
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