1. Analysis of
Provisions,
Offences
&
Penalties
[ICLS Mid Career Training Programme]
07.01.2013 | Session II
SEBI Prohibition of Insider Trading
Regulations
By
MANOJ KUMAR
Assistant Vice President
Corporate Professionals Capital Private Limited

2. • Investigation
• Prohibition on dealing, communicating or counseling
• Key Terms
• Procedure for Investigation
• Direction by SEBI
• Disclosures to be made
• Action in case of Default
• Model Code of Conduct
Agenda

3. WHAT IS INSIDER TRADING????
INSIDER TRADING
means
dealing in the securities
by an Insider,
who has the knowledge of
material “inside” information
of the company
which is not available in the
Public domain.

4. Who Is an INSIDER ?????

5. is wasOR
connected with the company
OR
deemed to have been connected with the company
AND
is expected to have access to
UNPUBLISHED PRICE SENSITIVE INFORMATION
Has Received Has Had Access
TO
UNPUBLISHED PRICE SENSITIVE INFORMATION
OR
Any Person
Who
OR
(ii)
(i)
INSIDER - REGULATION 2(e)

6. is a director under section 2(13) of the Companies Act, 1956,
or
deemed to be a director of that company under section 307(10) of the Act
may reasonably to have an access to
Unpublished Price Sensitive Information
Professional
relationship
Business
relationship
Any Person
an officer an employee
Who
OR
Whether TEMPORARY or PERMANENT
Holds the position Involving
or or
AND
CONNECTED PERSON

7. “CONNECTED PERSON”
Shall mean
any person
who is a connected person
prior to an act of insider trading
EXPLANATION TO CONNECTED PERSON
SIX MONTHS
6
6
6
6

8. Member of Board of Directors or employee of PFI;
Member of the Board of MF or member of BOD of the AMC of a MF or is an
employee who have a fiduciary relationship with the company;
MB, STA, RTA, DT, Broker, sub-broker, PM, IA, IC, or employee;
Intermediary, IC, TC, AMC, or employee or director or official of Stock
Exchange or Clearing House;
Company under the same Management/ Group/Subsidiary;
PERSON DEEMED TO BE CONNECTED -REGULATION 2(h)

9. Any Concern / Firm / trust / HUF/ Company / AOP in which connected person or person
mentioned in clause (vi), (vii) or (viii) of this clause
Have More than 10% of the holding or Interest
Relatives of the connected person;
Banker of the company;
Relative of any of the aforementioned persons;
Official or an employee of a Self-regulatory Organization;
PERSON DEEMED TO BE CONNECTED -REGULATION 2(h)

10. What Is Price Sensitive
Information ?????

11. Price Sensitive Information means:
information which relates
directly or indirectly
to a company
AND
which if published is likely to
materially affect the price of securities of
company.
PRICE SENSITIVE INFORMATION-
REGULATION 2(ha)

12. DEEMED PRICE SENSITIVE
INFORMATION
Periodical financial results of the company;
Intended declaration of dividend;
Issue of securities or buy back of securities;
Major expansion plan OR Execution of new projects;
Amalgamations, merger, takeovers;
Disposal of whole or substantial part of the undertaking;
Changes in policies, plans or operations

13. PRICE SENSITIVE INFORMATION- AS
PER CLAUSE 36 LISTING AGREEMENT
Change in the general character or nature of
business.
Disruption of operations due to natural
calamity.
Commencement of Commercial Production/
Commercial Operations.
Litigations/ dispute with a material Impact.
Revisions in Ratings.

14. PRICE SENSITIVE INFORMATION- AS
PER CLAUSE 36 LISTING AGREEMENT
Any other information having bearing on the
operation/ performance of the Company as well
as price sensitive information which includes but
not restricted to;
• Change in market lot / sub-division ;
• Voluntary delisting by the company ;
• Forfeiture of shares;
• Alteration in terms of any securities ;
• Information regarding securities issued abroad ;
• Cancellation of dividend/ rights/ bonus etc.

15. OFFICER OF A
COMPANY
Means
Person defined in Section
2(30) of the Companies
Act, 1956
Section 2(30) : "officer" includes any director,
manager or secretary, or any person in accordance
with whose directions or instructions the Board of
directors or any one or more of the directors is or
are accustomed to act.
Includes
Auditor of the Company
OFFICER OF A COMPANY – REGULATION 2(g)

16. UNPUBLISHED -REGULATION 2(k)
Information which is not published by the
company or its agents and is not specific
in nature.
Explanation
Speculative reports in print or electronic
media shall not be considered as published
information.

17. DEALING IN SECURITIES -
REGULATION 2(d)
“Dealing In Securities” means
an act of Subscribing, Buying, selling
or
agreeing to subscribe, buy, sell
or deal in any securities
by any person
either
as principal or agent;

18. PROHIBITION ON DEALING,
COMMUNICATING OR COUNSELLING

19. NO INSIDER
On Other’s behalfEither on his own behalf
DEAL IN SECURITIES OF THE COMPANY
or
shall
IN POSSESSION OF ANY UPSI
when
COMMUNICATE / COUNSEL / PROCURE
Directly Indirectlyor
ANY UPSI TO ANY PERSON
or
PROHIBITION ON INSIDER-REGULATION 3

20. Any communication which is required in the
Ordinary course of
business, OR
Profession, OR
Employment, OR
Under any law.
EXCEPTION TO REGULATION 3

21. NO COMPANY
Deal in Securities of
or
IN POSSESSION OF ANY
Other company
Associate of that
other company
UNPUBLISHED PRICE SENSITIVE INFORMATION
WHEN
SHALL
PROHIBITION ON COMPANY- REGULATION 3A

22. NON APPLICABILITY OF REGULATION 3A
The decision of
transaction or agreement
was not taken by officer or employee
of the company who is in possession
of UPSI; AND
Proper arrangement in place to
block the dissemination of
UPSI; AND
Adequate Procedures are in place to
demarcate the persons
having UPSI & persons dealing in
securities; AND
The information was
not so communicated and
no such advice was so given; OR.
The acquisition was in
line with the SEBI
Takeover Regulations

23. PROVISIONS RELATING TO
VIOLATION – REGULATION 4
Any insider, who
deals in securities
in contravention of the
provisions of Regulation 3 or 3A
shall be
guilty of Insider Trading..

24. INVESTIGATION

25. POWER TO MAKE INQUIRIES AND
INSPECTION- REGULATION 4A
If the Board Suspects any person
has violated the provisions of these
Regulations
It may Make enquiries,
or
appoint person to inspect books & records
of such persons
Form a prima facie opinion ,
whether there is violation of these
regulations

26. BOARD’S RIGHT TO INVESTIGATE -
REGULATION 5
Where the Board, is of prima facie opinion that it is necessary to
investigate and inspect
books of account, documents of
an insider or any person
On the basis of compliant received form investors, intermediaries or any
other person,
Or suo-motu upon its own knowledge, to protect the interest of
investors, it may
appoint an INVESTIGATING AUTHORITY

27. PROCEDURE FOR INVESTIGATION

28. REGULATION 6 to 9
On
Complaints
/ Suo-moto
Appointme
nt of
Invtg. Auth.
Notice
Issued
Investigati
on
Started
To provide
all
assistance
On
Conclusion
Report to
Board
Findings to
suspected
person
Shall Reply
within 21
days
Board will
Issue
directions

29. DIRECTIONS BY SEBI

30. REGULATION 6 to 9
Not to deal in securities ;
Not to dispose of any of the securities acquired in violation of these
regulations;
Not to communicate or counsel any person to deal in securities;
Declaring the transaction(s) in securities as null and void;
Deliver the securities back to the seller :
To transfer proceeds to the investor protection fund of a recognized stock
exchange.

31. Action in case of default

32. REGULATION 14
• Action under Section 11 of SEBI Act, 1992
• Directions under Section 11(4) (suspension of Trading & debarment)
• Directions under section 11B of the SEBI Act
• Cease and desist order in proceedings under section 11D of the
Act;
• Penalty for failure to furnish information, return etc. under section
15A of the SEBI Act, 1992
• Monetary penalties under section 15G of SEBI Act, 1992 (upto 3X
or Rs. 25 Cr. whichever is higher)
• Criminal prosecution under section 24 of the SEBI Act (ten year
imprisonment or fine upto Rs. 25 cr.)

33. DISCLOSURE TO BE MADE

34. Regulatio
n No.
Particulars By whom To whom Time
limit
Form
13(1) On the acquisition of >5% Any Person Company 2
working
days
A
13(2) Disclosure of shares or voting rights held
and positions taken in derivatives by such
person and his dependents (as defined by
the company) on becoming the Director or
officer
Director or
officer
Company 2
working
days
B
13(2A) Disclosure of shares or voting rights on
becoming the promoter or part of
promoter group
Promoter or
person
belonging to
promoter group
Company 2
working
days
B
13(3) Change in shareholding of (±) >2% from
the last disclosure made under sub
regulation (1) or under this sub regulation.
Persons already
holding more
than 5%
Company 2
working
days
C
DISCLOSURE REQUIREMENT

35. Regulatio
n No.
Particulars By whom To whom Time
limit
Form
13(4) Change in holding in excess of Rs.5 Lakh in
value or 25,000 shares or 1% of total
shareholding or voting rights from the last
disclosure made under sub regulation (2)
or under this sub regulation.
Director or
officer
Company as
well as Stock
Exchange
2
working
days
D
13(4A) Change in holding in excess of Rs.5 Lakh in
value or 25,000 shares or 1% of total
shareholding or voting rights from the last
disclosure made under Listing Agreement
or under sub regulation (2A) or under this
sub regulation.
Promoter or
person
belonging to
promoter
group
Company as
well as Stock
Exchange
2
working
days
D
13(6) On the receipt of disclosure under 13(1),
13(2), 13(2A), 13(3), 13(4) and 13(4A)
Company Stock
Exchange
2
working
days
A or B
or C or
D as the
case
may be
DISCLOSURE REQUIREMENT

36. Model code of conduct

37. CODE OF CONDUCT TO BE ABIDE BY
ALL LISTED COMPANIES
Organizations Associated with Securities Markets
including:
• All intermediaries
• AMC and trustees of mutual funds;
• The Self Regulatory Organizations;
• The Stock Exchanges / Clearing House /
Corporations;
• The Public Financial Institutions
• The Professional Firms
Such as Auditors, Accountancy Firms, Law
Firms, Analysts, Consultants, etc., assisting or
Advising Listed Companies

38. SCHEDULES – MODEL CODE OF
CONDUCT
SCHEDULE I
MODEL CODE OF CONDUCT
FOR PREVENTION OF INSIDER TRADING
PART A - FOR LISTED COMPANIES
PART B – FOR OTHER ENTITIES
SCHEDULE II
CODE OF CORPORATE DISCLOSURE PRACTICES
FOR
PREVENTION OF INSIDER TRADING

39. IMPORTANT TERMS- NEED TO KNOW
• PSI should be disclosed only to those within
the company who need the information to
discharge their duty.
• Limited access to confidential information
• Files containing confidential information shall
be kept secure.
• Computer files must have adequate security of
login and pass word etc.

40. PRE CLEARANCE OF TRADES
• All D/O/E of the Co and their dependants as defined by
the company who intend to deal in the securities
beyond a limit should pre-clear the transactions.
• An application to the Compliance officer indicating
• The estimated number of securities that the D/O/E and
their dependants intends to deal in,
• The details as to the depository with which he has a
security account,
• The details of securities in such depository mode.
• Other details as may be required by any rule made by
the company in this behalf.

41. TRADING WINDOW
• Company shall specify a trading period, to be called
"Trading Window", for trading in the company’s
securities.
• The trading window shall be closed during the time
the Price Sensitive information is un-published.
• When the trading window is closed, the D/ E shall
not trade in the company's securities in such
period.
• The trading window shall be opened 24 hours after
the Price Sensitive Information is made public.

42. RESTRICTED /GREY LIST
To restrict trading in certain securities and designate such list as restricted / grey
list.
Client Companies for which any assignment or appraisal report or credit rating
assignments are going on.
Any security which is purchased or sold by the organisation / firm on behalf of its
clients / schemes of mutual funds, etc. shall be put on the restricted / grey list.
As the restricted list itself is a highly confidential information, It shall be maintained
by CO.

43. CHINESE WALL
• "Chinese Wall" policy demarcates “inside areas” from
"public areas".
• Those areas having access to confidential information,
considered “inside areas” and areas which deal with
sales / marketing / investment considered "public
areas".
• The employees in the inside area shall not
communicate any PSI to anyone in public area.
• In exceptional circumstances employees from the
public areas may be brought "over the wall" and given
confidential information on the basis of "need to
know" criteria, under intimation to the CO

44.  Compliance Officer means ‘Senior Level Employee’ who shall report
to the MD / CEO.
 The CO shall be responsible for
- setting forth policies, procedures
- monitoring adherence to the rules for the preservation of “PSI”,
- pre-clearing of designated employees’ and their dependents’ trades
- monitoring of trades and the implementation of the code of conduct
under the overall supervision of the Board of the listed company.
 The CO shall maintain a record of the designated employees and any
changes made in the list of designated employees.
 To Provide clarifications regarding the SEBI (Prohibition of Insider
Trading) Regulations, 1992 & the company's code of conduct to the
Company’s employees.
COMPLIANCE OFFICER (CO)

45. Lastly………….
It is easier to identify the beneficiaries of
insider dealing
But
the extent of losses occurred to the
general investor is
impossible to calculate

46. Thanking you …
Manoj Kumar
Assistant Vice President
Corporate Professionals Capital Private Limited
D-28, South Extension –I, New Delhi-110 049
Ph: +91.11.40622200; Fax: +91.11.40622201;
E: Manoj@indiacp.com | M: +91.9910688433