Principle Based Regulation Legislative Notes Provides specific defenses Introduced Trading Plans Crucial Role for Compliance Officer Everybody connected directly or indirectly is covered What is Unpublished Price Sensitive Information? What is the role of Compliance Officer in implementing this Regulations.

1. SEBI (PROHIBITION OF
INSIDER TRADING)
REGULATIONS, 2015
CS Rahul P Sahasrabuddhe
Email: rahul@sprscs.com
CONFERENCE CALL
MONDAY, AUGUST 1, 2016

2. DISCLAIMER
The views expressed are
personal and does not
necessarily be subscribed by
my Organization.

3. Le Chiffre manages portfolio of a Terrorist Organization.
Invests these moneys for taking a Short Position in the
“Skyfleet Airlines- A Listed Co”
Le Chiffre's henchman, Carlos, plans to blow up prototype
Skyfleet Airliner
3

4. And there goes James Bond. Foils the Plan.
And Le Chiffre's loses the whole money.
4

5. UNDERSTANDING
INSIDER TRADING
Information dissymmetry
Misappropriation (of information) Theory

6. THIS PICTURE IS USED FOR EDUCATIONAL PURPOSE.
Source- http://www.bhagavatam-katha.com/mahabharata-story-arjuna-and-dury
seeking-help-from-krishna

7. UNDERSTANDING
INSIDER TRADING
Watch Wall Street I

8. Insider Trading AND Front Running
UNDERSTANDING INSIDER
TRADING
8

9. INTO THE MEMORY LANE
• Thomas Committee (1948) Report
resulted into 307/8 of the CoA,56
• The Sachar Committee, 1977 and
Patel Committee, 1984 -emphasized
the requirement of a separate statute
to curb insider trading

10. INTO THE MEMORY LANE
• SEBI Act, 1992 – S 11(1)(g)
empowered SEBI to initiate measures
to curb Insider Trading.
• SEBI (Insider Trading) Regulations,
1992 were framed.
• Title of the Regulations were amended

11. INTO THE MEMORY LANE
• SEBI (Prohibition of Insider Trading)
Regulations - Title of the Regulations
were amended in 2002.
• Justice N K Sodhi report.

12. INTO THE MEMORY LANE
• SEBI (Prohibition of Insider Trading
Regulations) 2015 notified on Jan 15,
2015 w.e.f. 120 days thereafter

13. SEBI (Prohibition of Insider
Trading Regulations) 2015
• Principle Based Regulation
• Legislative Notes
• Provides specific defenses
• Introduced Trading Plans
• Crucial Role for Compliance Officer
• Everybody connected directly or
indirectly is covered

14. UNDERSTANDING
INSIDER
INSIDER
A person within a group or organization,
especially someone privy to information
unavailable to others.

15. UNDERSTANDING
INSIDER
INSIDER - As per Regulation 2 (g)
• A Connected Person
• In possession of UPSI (Unpublished
Price Sensitive Information)

16. UNDERSTANDING
TRADING
TRADING – As per Regulation 2 (l)
means and includes subscribing, buying, selling,
dealing, or agreeing to subscribe, buy, sell, deal
in any securities, and "trade" shall be construed
accordingly.

17. UNDERSTANDING
TRADING
What is Dealing
Trading Vs. Dealing

18. Applicable to whom
Listed Companies
Capital Market Intermediaries
Every other person - required to
handle UPSI

19. Came into force
within 120 days from the Date of
notification of these rules i.e. w.e.f.
15 May 15

20. Important definitions
Insider Trading (Sec 195(1)(a) of COA, 2013
(i) an act of subscribing, buying, selling, dealing or
agreeing to subscribe, buy, sell or deal in any
securities by any director or key managerial
personnel or any other officer of a company either as
principal or agent if such director or key managerial
personnel or any other officer of the company is
reasonably expected to have access to any non-
public price sensitive information in respect of
securities of company; or
(ii) an act of counselling about procuring or
communicating directly or indirectly any non-public
price-sensitive information to any person;

21. Important definitions
Compliance Officer R 2 (1)(c)
1. Designated Senior Officer reporting to the BOD
2. Needs to be financially literate
3. Well verse with Compliance requirements of PIT R.
4. Responsible for Company’s PIT R policy,
procedures, maintenance of records and
monitoring.

22. Important definitions
Connected Person (CP) R 2 (1)(d)
1. Person associated with the Co. in any
capacity & having access to UPSI
2. Deemed to be CP unless contrary is
estb.
3. relative of 1
4. HC /Associated or SC
5. Capital Market intermediary; its officers
and Directors

23. Important definitions
Connected Person (CP) R 2 (1)(d)
6. Stock Exchange/ Clearing House official
7. Member of Board of Trustee/ Member BoD
of AMC
8. Director of PFI
9. Official of SRO
10.Banker
11.Share holder - over 10% stake in the Co.
12. CP #3 to # 10 – Deeming legal fiction
and is rebuttable

24. Important definitions
Generally Available
Information R 2 (1)(e)

26. Important definitions
Unpublished Price Sensitive
Information R 2 (1)(n)
Information, relating to a company - not
generally available which upon becoming
generally available, is likely to materially
affect the price of the securities

28. Unpublished Price Sensitive
Information
Information Like
1. financial results;
2. dividends;
3. change in capital structure;
4. Business restructuring;
5. and such other transactions;
6. changes in key managerial personnel; and
7. material events in accordance with the
listing agreement.
And such any other PSI under the SUN

29. Important definitions
Immediate Relative R 2(1)(f)
1. Spouse
2. Parent
3. Sibling
4. Child
5. And anyone with whom he consults for
taking decisions relating to securities.

30. IMPORTANT
PROVISIONS

31. RESTRICTIONS ON COMMUNICATION
AND TRADING BY INSIDERS
R 3 Communication or procurement of
UPSI
1. No Insider shall communicate UPSI
except for discharging legal duties
2. Except for legitimate purpose, no one
shall procure UPSI from Insider
3. UPSI may be communicated w.r.t.
a) To make an open offer under SAST
b) To dispel any information
asymmetry

32. RESTRICTIONS ON COMMUNICATION
AND TRADING BY INSIDERS
R4 Trading with UPSI
No insider shall trade with UPSI except
a) Off market inter se transfer
b) In case of non individual traders
i) Persons with UPSI and traders
are different
ii) Persons with UPSI must be
secluded
c) Trades as per Trading Plan

33. TRADING PLAN
R5
1. Insider may formulate TP
2. CO may approve TP subject to
public discl.
3. Cool off period of 6 months for
TP
4. No trading between 20th Trading
days prior to Fin result Period
End Date and 2 TDs after the
results disclosure day
5. TP for min. 12 months
6. TPs not to overlap each other

34. TRADING PLAN
R 5
7. TP to consist of Value/no of
shares alongwith date of trading
and periodicity
8. CO shall be responsible for TP
execution
9. Approved TP must be
implemented
10. TP shall not commence unless
UPSI is made PPSI
11. CO to notify TP to SEs

35. DISCLOSURES OF TRADING BY
INSIDERS
R 6 General Obligations
1. Disclosure by Insider for self /
relatives
2. (non individuals) persons who takes
trading decisions
3. Trading in securities includes trading
in derivatives
4. Disclosure Documents and records
must be maintained for 5 years

36. DISCLOSURES OF TRADING BY
INSIDERS
Reg. 7 Disclosures by certain
persons (Initial Discl)
1. Every promoters, KMP, Director within
30 days of this regulations made
effective
2. Within 7 days of appointment

37. DISCLOSURES OF TRADING BY INSIDERS
R7 Disclosures by certain
persons (Continual Discl)
1. Promoter, employee, Director of Listed
Co - within 2 days of entering into trade
– value more than Rs. 10 Lacs or as
prescribed.
2. Company in turn shall notify the same to
the SEs in 2 days.
3. Connected persons shall submit
disclosures as per Company Policy

38. CODE OF CONDUCT
R 8
1. Minimum standards as per – Sch A
2. BOD of listed co shall frame code of
practices and procedures for fair
disclosure of unpublished price
sensitive information

39. CODE OF CONDUCT
R9
1. Code of Conduct to have minimum
standards set out in Schedule B
2. BOD of listed co shall frame Code of
Conduct to regulate, monitor and report
employees and connected person’s trade
3. Other person also to have CoC
4. Compliance officer to monitor

40. SANCTION FOR VIOLATIONS.
R 10
Any contravention of these regulations shall be dealt
with by SEBI in accordance with the Act.
Sec 195 (2) of COA – Any violation of Section 195
1) 5 Yrs of Imprisonment
2) Fine of *INR 5 Lac to 25 Crores or 3 times of
profits from Insider Trading – whichever is
higher
3) Both
Sec 15G – SEBI Act * 10 Lacs to 25 Crores

41. SCHEDULE A
Principles of Fair Disclosure for Code
Of Practices and Procedures for Fair
Disclosure UPSI
1. Prompt public discl of PSI
2. Uniform and universal discl of PSI
3. Senior level employee as Chief Info. Officer
4. Appropriate response to newspaper rumours
queries
5. Info shared with Research Analysts should
not be UPSI
6. Maintain trasnscripts of meeting with
Analysts
7. Handle UPSI on need to know basis

42. SCHEDULE B
Minimum Standards for Code of
Conduct to REGULATE, MONITOR AND
REPORT TRADING BY INSIDERS
1. CO to report to BOD in general and
Chairman Audit Committee in particular.
2. Chinese wall policy
3. Identify Designated Employees
4. Notional Trading Window Closure
5. Pre-clearance of Trades
6. Restricted List of Securities
7. No Contra trade within 6 months
8. Any violation must be reported by CO to
SEBI

43. CONTRARIAN VIEW
1. Friedman, Nobel laureate (Economics)
You want more insider trading, not less. You want to give the people most likely to have
knowledge about deficiencies of the company an incentive to make the public aware of
that. …… the trader should be required to make his trade known to the public, because
the buying or selling pressure itself is information for the market……

45. CS Rahul P Sahasrabuddhe
Partner, SPRS And Co,
Company Secretaries
Email: rahul@sprscs.com
Mobile 98 196 500 45