SEBI on Trading Window closure period under Clause 4 of Schedule B read with Regulation 9 of SEBI (Prohibition of Insider Trading) Regulations, 2015 (“PIT Regulations”) – Framework for restricting trading by Designated Persons (“DPs”) by freezing PAN at security level

Aug 05, 2022 | by TeamLease RegTech Legal Research Team

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Secretarial ComplianceThe Securities Exchange Board of India (SEBI) on August 05, 2022, issued a circular on the Trading Window closure period under Clause 4 of Schedule B read with Regulation 9 of SEBI (Prohibition of Insider Trading) Regulations, 2015 (“PIT Regulations”) – Framework for restricting trading by Designated Persons (“DPs”) by freezing PAN at security level

Clause 4 (1) of Schedule B read with Regulation 9 of PIT Regulations, inter-alia, states, "Designated persons may execute trades subject to compliance with these regulations. Towards this end, a notional trading window shall be used as an instrument for monitoring trading by the designated persons.  The trading window shall be closed when the compliance officer determines that a designated person or class of designated persons can reasonably be expected to possess unpublished price-sensitive information (“UPSI”). Such closure shall be imposed in relation to such securities to which such UPSI relates. Designated persons and their immediate relatives shall not trade in securities when the trading window is closed”.

One of the instances of closure of trading window is provided in Clause 4 (2) of Schedule B read with Regulation 9 of PIT Regulations, which inter-alia states that “trading restriction period shall be made applicable from the end of every quarter till 48 hours after the declaration of financial results......”. 

In order to rationalize the compliance requirement under Clause 4 of Schedule B read with Regulation 9 of PIT Regulations, improve ease of doing business and prevent inadvertent non-compliance of provisions of PIT Regulations by DPs, after having deliberations with Stock Exchanges and Depositories and listed companies, it has been decided that Stock Exchanges and Depositories shall develop a system to restrict trading by DPs of the listed company during trading window closure period. 

To begin with, the provisions of this circular shall be applicable to the declaration of financial results of the listed company that is or was part of benchmark indices i.e. NIFTY 50 and SENSEX from the date of implementation of this circular. Further, to begin with, the restriction on trading shall be for on-market transactions, off-market transfers, and the creation of pledges in equity shares and equity derivatives contracts (i.e. Futures and Options) of such listed companies. 

The procedure for implementation of the system is enclosed in Annexure- A. The flow chart of the same is held in Annexure - B, the document is attached. 

This circular shall come into force with effect from the quarter ending September 30, 2022.

[Notice No.SEBI/HO/ISD/ISD-SEC-4/P/CIR/2022]


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