Appendix 70
SECURITIES AND EXCHANGE BOARD OF INDIA (PROHIBITION OF INSIDER TRADING)
REGULATIONS, 1992
LE/6308/92, dt. 19‑11‑1992 : In exercise of the powers
conferred by section 30 of the Securities and Exchange Board of India Act, 1992
(15 of 1992), the Board with the previous approval of the Central Government,
hereby makes the following regulations, namely
1. Short title and
commencement.‑
(1) These regulations may be called the
Securities and Exchange Board of India (Prohibition of Insider Trading)
Regulations, 1992.
(2) These regulations shall come into force
on the date of their publication in the Official Gazette.
2. Definitions.‑ In these regulations, unless
the context otherwise requires:
(a) 'Act' means the Securities and Exchange
Board of India Act, 1992 (15 of 1992);
(b) 'body corporate' means a body corporate
as defined in section 2 of the Companies Act, 1956 (1 of 1956);
(c) 'connected person' means any person who
(i) is a director, as defined in clause of
section 2 of the Companies Act, 1956 (1 of 1956) of a company, or is deemed to
be director of that company by virtue of sub clause (10) of section 307 of that
Act, or
(ii) occupies the position as an officer or
an employee of the company or holds a position involving a professional or
business relationship between himself and the company whether temporary or
permanent and who may reasonably be expected to have an access to unpublished
price sensitive information in relation to that company;
Explanation.‑For the
purpose of clause (c) the words, "connected person" shall include any
person who is a connected person six months prior to an act of insider trading.
(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;
(e) 'insider' means any person who is or was
connected with the company or is deemed to have been connected with the company
and who is reasonably expected to have access, to unpublished price sensitive
information in respect of securities of a company, or who has received or has
had access to such unpublished price sensitive information',
(f) 'investigating authority' means any
Officer of the Board or any other person, not being a firm, body corporate or
an association of persons having experience in dealing with the problems
relating to the securities market and who is authorised by the Board under
Chapter III;
(g) 'officer of a company' means any person
as defined in clause (30) of section 2 of the Companies Act, 1956 (1 of 1956)
including an Auditor of the company;
(h) 'person is deemed to be a connected person' if such person,
(i) is a company under the same management
or group, or any subsidiary company thereof within the meaning of sub‑section
(IB) of section 370, or sub‑section (11) of section 372, of the Companies
Act, 1956 (1 of 1956) of sub‑clause (g) of section 2 of the Monopolies
and Restrictive Trade Practices Act, 1969 (54 of 1969) as the case may be; or
(ii) is an intermediary as specified in
section 12 of the Act, investment company, trustee company, asset management
company or an employee or director thereof or an official of a stock exchange
or of clearing house or corporation;
(iii) is a merchant banker, share transfer
agent, registers to an issue, debenture trustee, broker, portfolio manager,
Investment Advisor, sub‑broker, investment company or an employee
thereof, or, is a member of the board of trustees of a mutual fund or a member
of the board of directors of the asset management company of a mutual fund or
is an employee thereof, who have a fiduciary relationship with the company;
(iv) is a Member of the board of directors, or
an employee, of a public financial institution as defined in section 4A of the
Companies Act, 1956; or
(v) is an official or an employee of a half
regulatory organisation recognised or authorised by the board of a regulatory
body; or
(vi) is a relative of any of the aforementioned
persons;
(vii) is a banker of the company.
(viii) relatives of the connected person
(i) a concern, firm, trust Hindu undivided
family, company, association of persons wherein the relatives of persons
mentioned in sub‑clauses (vi), (vii) and (vid) has more than 10 per cent
of the holding or interest.
(ha) 'price sensitive information' means any
information which relates directly or indirectly to a company and which if
published is likely to materially affect the price of securities of company;
Explanation.‑ The
following shall be deemed to be price sensitive information :-
(i) periodical financial results of the
company,
(ii) intended declaration of dividends (both
interim and final),
(iii) issue of securities or buy‑back of
securities,
(iv) any major expansion plans or execution of
new projects,
(v) amalgamation, mergers or takeovers,
(vi) disposal of the whole or substantial part
of the undertaking,
(vii) any significant changes in policies, plans
or operations of the company;
(i) 'relative' means a person, as defined
in section 6 of the Companies Act, 1956 (1 of 1956);
(j) 'stock exchange' means a stock exchange
which is recognised by the Central Government for Securities and Exchange Board
of India under section 4 of Securities Contracts (Regulation) Act, 1956 (42 of
1956);
(k) 'Unpublished' means 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.
3. Prohibition
on dealing, communication or counselling on matters relating to insider
trading.‑ No insider shall
(i) either on his own behalf, or on behalf
of any other person, deal in securities of a company listed on any stock
exchange when in possession of any unpublished price sensitive information;
(ii) communicate, counsel or procure,
directly or indirectly, any unpublished price sensitive information to any
person who while in possession of such unpublished price sensitive information
shall not deal in securities :
Provided that nothing
contained above shall be applicable to any communication required in the
ordinary course of business or under any law.
3A. No company shall deal in the
securities of another company or associate of that other company while in
possession of any unpublished price sensitive information.
4. Violation
of provisions relating to insider trading.‑ Any insider who deals in
securities in contravention of the provisions of regulation 3 or 3A shall be
guilty of insider trading.
4A. Power
to make inquiries and inspection.‑ (1) If the Board suspects that any person has
violated any provision of these regulations, it may make inquires with such
persons or any other person as mentioned in clause (i) of sub‑section (2)
of section 11 as deemed fit, to form a prima facie opinion as to whether there
is any violation of these regulations.
(2) The Board may appoint one or more officers
to inspect the books and records of insider(s) or any other persons as
mentioned in clause (i) of sub‑section (2) of section II for the purpose
of sub regulation (1).
5. Board's
right to investigate.‑ (1) Where the Board, is of prima facie opinion that
it is necessary to investigate and inspect the books of account, either records
and documents of an insider 8[or any other person mentioned in clause (i) of
sub‑section (1) of section 11 of the Act for any of the purposes
specified in sub‑regulation (2), it may appoint an Investigating
Authority for the said purpose:
(2) The purpose referred to in sub‑regulation (1) may be as
follows:
(a) to investigate into the complaints
received from investors, intermediaries or any other person on any matter
having a bearing on the allegations of insider trading; and
(b) to investigate suo motu upon its own
knowledge or information in its possession to protect the interest of investors
in securities against breach of these regulations.
6. Procedure
for investigation.‑ (1) Before undertaking any investigation under regulation 5, the Board
shall give a reasonable notice to insider for that purpose.
(2) Notwithstanding anything contained in
sub‑regulation (1), where the Board is satisfied that in interest of
investors or in public interest, no such notice should be given, it may, by an
order in writing direct that the investigation be taken up without such notice.
(3) On being empowered by the Board, the
Investigating Authority shall undertake the investigation and inspection of
books of accounts and the insider against whom an investigation is being
carried out an insider or any other person mentioned‑in clause (i) of sub‑section
(1) of section 11 of the Act shall be bound to discharge his obligations as
provided in regulation 7.
7. Obligations
of insider on investigation by the Board.‑ (1) It shall be the duty of
every insider, who is being investigated , 8 [or any other person mentioned in
clause (i) of sub‑section (1) of section II of the Act to produce to the
Investigating Authority such books, accounts and other documents in his custody
or control and furnish the Authority with the statements and information
relating to the transactions in securities market within such time as the said
Authority may require.
(2) The insider or any other person
mentioned in clause (i) of sub‑section (2) of section II of the Act shall
allow the Investigating Authority to have reasonable access to the premises
occupied by such insider and also extend reasonable facility for examining any
books, records, documents and computer data in the possession of the stock‑broker
or any other person and also provide copies of documents or other material
which, in the opinion of the Investigating Authority are relevant.
(3) The Investigating Authority, in the
course of investigation, shall be entitled to examine or record statements of
any member, director, partner, proprietor and employee of the insider or any
other person mentioned in clause (i) of sub‑section (2) of section II of
the Act.
(4) It shall be the duty of every director,
proprietor, partner, officer and employee of the insider to give to the
Investigating Authority all assistance in connection with the investigation,
which the insider or any other person mentioned in clause (i) of sub‑section
(2) of section 11 of the Act may be reasonably expected to give.
8. Submission
of Report to the Board.‑ The Investigating Authority shall, within reasonable
time of the conclusion of the investigation submit an investigation report to
the Board.
9. Communication
of Findings etc.‑ (1) The Board shall, after consideration of the investigation report
communicate the findings to the person suspected to be involved in insider
trading or violation of these regulations.
(2) The person to whom such findings have
been communicated shall reply to the same within 21 days; and
(3) On receipt of such a reply or
explanation, if any, from such person, the Board may take such measures as it
deems fit to protect the interests of the investors and in the interests of the
securities market and for the due compliance with the provisions of the Act,
the Regulations made there under including the issue of directions under
regulation 11.
10. Appointment
of Auditor.‑ Notwithstanding anything contained in regulation 4A and regulation 6,
the Board may appoint a qualified Auditor to investigate into the books of
account or the affairs of the insider, or any other person mentioned in clause
(i) of sub‑section (1) of section II of the Act provided that, the
Auditor so appointed shall have the same powers of the Inspecting Authority as
stated in regulation 4A and regulation 5 and the insider shall have the
obligations specified in regulation 7.
11. Directions
by the Board.‑ The Board may without prejudice to its right to initiate criminal
prosecution under section 24 or any action under Chapter VIA of the Act, to
protect the interests of investors and in the interests of the securities
market and for due compliance with the provisions of the Act, regulations made
there under issue any or all of the following order, namely :
(a) directing the insider or such person as
mentioned in clause (i) of sub‑section (2) of section II of the Act not
to deal in securities in any particular manner;
(b) prohibiting the insider or such person
as mentioned in clause (i) of sub‑section (2) of section II of the Act
from disposing of any of the securities acquired in violation of these
regulations;
(c) restraining the insider to communicate or counsel any person
to deal in securities;
(d) declaring the transaction(s) in securities as null and void;
(e) directing the person who acquired the
securities in violation of these regulations to deliver the securities back to
the seller :
Provided that in case the
buyer is not in a position to deliver such securities, the market price
prevailing at the time of issuing of such directions or at the time of
transactions whichever is higher, shall be paid to the seller;
(f) directing the person who has dealt in
securities in violation of these regulations to transfer an amount or proceeds
equivalent to the cost price or market price of securities, whichever is higher
to the investor proteciton fund of a recognised stock exchange.
12. Code
of internal procedures and conduct for listed companies and other entities.‑ (1) All listed companies
and organisations associated with securities markets including :
(a) the intermediaries as mentioned in
section 12 of the Act, as set management company and trustees of mutual funds;
(b) the self‑regulatory organisations
recognised or authorised by the Board;
(c) the recognised stock exchanges and
clearing house or corporations;
(d) the public financial institutions as
defined in section 4A of the Companies Act, 1956, and
(e) the professional firms such as auditors,
accountancy firms, law firms, analysts, consultants, etc., assisting or
advising listed companies,
shall frame a code of
internal procedures and conduct as near thereto as the model code specified in
Schedule I of these regulations.
(2) The entities mentioned in sub‑regulation
(1), shall abide by the Code of Corporate Disclosure Practices as specified in
Schedule II of these regulations.
(3) All entities mentioned in sub‑regulation
(1), shall adopt appropriate mechanisms and procedures to enforce the codes
specified under sub‑regulations (1) and (2).
(4) Action taken by the entities mentioned
in sub‑regulation (1) against any person for violation of the code under
sub‑regulation (3) shall not preclude the Board from initiating
proceedings for violation of these regulations.
13. Disclosure
of interest or holding by directors and officers and substantial shareholders
in listed companies
Initial disclosure :
(1) Any person who holds more than 5 per
cent. shares or voting rights in any listed company shall disclose to the
company, the number of shares or voting rights held by such person, on becoming
such holder, within four working days of :
(a) the receipt of intimation of allotment of shares; or
(b) the acquisition of shares or voting fights, as the case may
be.
(2) any person who is a director or officer
of a listed company, shall disclose to the company, the number of shares or
voting rights held by such person, within four working days of becoming a
director or officer of the company.
Continual disclosure :
(3) any person who holds more than 5 per
cent. shares or voting rights in any listed company shall disclose to the
company the number of shares or voting rights held and change in shareholding
or voting rights, even if such change results in shareholding falling below 5
per cent., if there has been change in such holdings from the last disclosure
made under sub‑regulation (1) or under this sub‑regulation; and
such change exceeds 2 per cent. of total shareholding or voting rights in the
company.
(4) any person who is a director or officer
of a listed company, shall disclose to the company, the total number of shares
or voting rights held and change in shareholding or voting rights, if there has
been a change in such holdings from the last disclosure made under sub‑regulation
(2) or under this sub‑regulation and the change exceeds rupees 5 lakhs in
value or 5,000 shares or 2 per cent. of total shareholding or voting rights,
whichever is lower.
(5) The disclosure mentioned in sub‑regulations
(3) and (4) shall be made within four working days of :
(a) the recept of intimation of allotment of shares, or
(b) the acquisition or sale of shares or voting rights, as the
case may be.
Disclosure by company to stock exchanges :
(6) Every listed company, within five days
of receipt, shall disclose to all stock exchanges on which the company is
listed, the information received under sub‑regulations (1), (2), (3) and
(4).
14. Violation
of provision relating to disclosure.‑ (1) A person who violates provisions of
regulation 12 shall be liable for action under section 11 or 11 B and/or
section 24 of the Act.
(2) A person who violates provisions of
regulation 13 shall be liable for action as specified in regulation 11 or
sections 11, 11 B or action under Chapter VIA or section 24 of the Act.
15. Appeal
to the Central Government.‑ Any person aggrieved by an order of the Board under
these regulations may prefer an appeal to the Securities Appellate Tribunal.
[See under regulation 12(1)]
PART A
MODEL CODE OF CONDUCT FOR
PREVENTION OF INSIDER TRADING FOR LISTED COMPANIES
1.0 Compliance officer:
1. The listed company has appointed a
compliance officer (senior level employee) who shall report to the managing
director/chief executive officer.
2. The compliance officer shall be
responsible for setting forth policies, procedures, monitoring adherence to the
rules for the preservation of "price sensitive information", pre‑clearing
of designated employees' and their dependents' trades (directly or through
respective department heads as decided by the company), monitoring of trades
and the implementation of the code of conduct under the overall supervision of
the Board of the listed company.
Explanation.‑For the
purpose of this Schedule, the term "designated employee" shall
include :-
(i) officers comprising the top three tiers
of the company management and all employees in the finance department;
(ii) the employees designated by the company
to whom these trading restrictions shall be applicable, keeping in mind the
objectives of this code of conduct.
3. The compliance officer shall maintain a
record of the designated employees and any changes made in the list of
designated employees.
4. The compliance officer shall assist all
the employees in addressing any clarifications regarding the Securities and
Exchange Board of India (Prohibition of Insider Trading) Regulations, 1992 and
the company's code of conduct.
2.0 Preservation of
"price sensitive information"
1. Employees/directors shall maintain the
confidentiality of all price sensitive information. Employees/directors shall
not pass on such information to any person directly or indirectly by way of
making a recommendation for the purchase or sale of securities.
2.2 Need to know:
Unpublished
price sensitive information is to be handled on a "need to know"
basis, i.e., unpublished price sensitive information should be disclosed only
to those within the company who need the information to discharge their duty
and whose possession of such information will not give rise to a conflict of
interest or appearance of misuse of the information.
All non‑public
information directly received by any employee should immediately be reported to
the head of the department.
1. price sentsitive information is to be handled on a "need to know" basis, i.e., price sensitive information should be disclosed only to those within the company who need the information to discharge their duty.
2.3 Limited access to
confidential information:
1. Files containing confidential
information shall be kept secure. Computer files must have adequate security of
login and password etc.
3.0 Prevention of misuse of
"price sensitive information"
3.1. All directors/offices and designated employees of the company
shall be subject to trading restrictions as enumerated below
3.2 Trading window:
3.2.1 The 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 information
referred to in para 3.2.3 is unpublished.
3.2.2 When the trading window is closed, the
employees/directors shall not trade in the company's securities in such period.
3.2.3. The trading window shall be, inter alia,
closed at the time of:
(a) Declaration of financial results
(quarterly, half‑yearly and annual);
(b) Declaration of dividends (interim and
final);
(c) Issue of securities by way of
public/rights/bonus, etc.;
(d) Any major expansion plans or execution
of new projects;
(e) Amalgamation, mergers, takeovers and buy‑back;
(f) Disposal of whole or substantially whole
of the undertaking;
(g) Any changes in policies, plans or
operations of the company.
3.2.4 The trading window shall be opened 24 hours
after the information referred to in para 3.2.3 is made public.
3.2.5 All directors/officers/designated employees
of the company shall conduct all their dealings in the securities of the
company only in a valid trading window and shall not deal in any transaction
involving the purchase or sale of the company's securities during the periods
when trading window is closed, as referred to in para 3.2.3 or during any other
period as may be specified by the company from time to time.
3.2.6 In the case of ESOPs, exercise of option
may be allowed in the period when the trading window is closed. However, sale
of shares allotted on exercise of ESOPs shall not be allowed when trading
window is closed.
3.3 Pre‑clearance of
trades
3.3.1 All directors/officers/designated employees
of the company who intend to deal in the securities of the company (above a
minimum threshold limit to be decided by the company) should pre clear the
transactions as per the pre‑dealing procedure as described hereunder.
3.3.2 An application may be made in such form as
the company may notify in this regard, to the compliance officer indicating the
estimated number of securities that the designated employee/ officer/director
intends to deal in, the details as to the depository with which he has a
security account, the details as to the securities in such depository mode and
such other details as may be required by any rule made by the company in this
behalf.
3.3.3 An undertaking shall be executed in favour
of the company by such designated employee/director/officer incorporating,
inter alia, the following clause, as may be applicable :
(a) That the employee/director/officer does
not have any access or has not received "price sensitive information"
up to the time of signing the undertaking.
(b) That in case the
employee/director/officer has access to or receives "price sensitive
information" after the signing of the undertaking but before the execution
of the transaction he/she shall inform the compliance officer of the change in
his position and that he/she would completely refrain from dealing in the
securities of the company till the time such information becomes public.
(c) That he/she has not contravened the code
of conduct for prevention of insider trading as notified by the company from
time to time.
(d) That he/she has made a full and true
disclosure in the matter.
4.0 Other restrictions
4.1 All directors/officers/designated
employees shall execute their order in respect of securities of the company
within one week after the approval of pre‑clearance is given. if the
order is not executed within one week after the approval is given, the
employee/director must pre‑clear the transaction again.
4.2 all directors/officers/designated
employees shall hold their investment in securities for a minimum period of 30
days in order to be considered as being held for investment purposes. The
holding period shall also apply to subscription in the primary market (IPOs).
In the case of IPOs, the holding period would commence when the securities are
actually allotted.
4.3 In case the sale of securities is
necessitated by pesonal emergency, the holding period may be waived by the
compliance officer after recording in writing his/her reasons in this regard.
5.0 Reporting requirements
for transacti6iis‑in securities
5.1 All directors/officers/designated
employees of the listed company shall be required to forward following details
of their securities transactions including the statement of dependent family
members (as defined by the company) to the compliance officer:
(a) all holdings in seucrities of that
company by directors/ officers/designated employees at the time of joining the
company;
(b) periodic statement of any transactions
in seucrities (the periodicity of reporting may be defined by the company. The
company may also be free to decide whether reporting is required for trades
where pre‑clearance is also required); and
(c) annual statement of all holdings in
securities.
5.2 The compliance officer shall maintain
records of all the declarations in the appropriate form given by the
directors/officers/designated employees for a minimum period of three years.
5.3 The compliance officer shall place
before the managing director/chief executive officer or a committee specified
by the company, on a monthly basis all the details of the dealing in the
securities by employees/ director/officer of the company and the accompanying
documents that such persons had executed under the pre‑dealing procedure
as envisaged in this code.
6.0 Penalty for
contravention of code of conduct
6.1 Any employee/officer/director who trades
in securities or communicates any information for trading in securities, in
contravention of the code of conduct may be penalized and appropriate action
may be taken by the company.
6.2 Employees/officers/directors of the
company who violate the code of conduct shall also be subject to disciplinary
action by the company, which may include wage freeze, suso6nsion, ineligibility
for future participation in employee stock option plans, etc.
6.3 the action by the company shall not
preclude SEBI from taking any acting in the case of violation of the SEBI
(Prohibition of Insider Trading), Regulations, 1992.
7.0 Information
to SEBI in case of violation of SEBI (Prohibition of Insider Trading) Regulations, 1992
7.1 In case it is observed by the
company/compliance officer that there has been a violation of the SEBI
(Prohibition of Insider Trading) Regulations, 1992, the SEBI shall be informed
by the company.
1.0 Compliance officer:
1.1. The organization/firm has a compliance
officer (senior level employee) reporting to the managing partner/chief
executive officer.
1.2. The compliance officer shall be
responsible for setting forth policies and procedures and monitoring adherence
to the rules for the preservation of "price sensitive informaiton",
pre‑clearing of all designated employees and their dependents trades
(directly or through respective department heads as decided by the
organisation/firm), monitoring of trades and the implementation of the code of
conduct under the overall supervision of the partners/proprietors.
1.3. The compliance officer shall also assist
all the employees/directors/partners in addressing any clarifications regarding
the SEBI (Prohibition of Insider Trading) Regulations, 1992 and the
organisation/firm's code of conduct.
1.4. The compliance officer shall maintain a
record of the designated employees and any changes made in the list of
designated employees.
2.0 Preservation of
"price sensitive information"
2.1 Employees/directors/partners shall
maintain the confidentiality of all price sensitive information.
Employees/directors/partners must not pass on such information directly or
indirectly by way of making a recommendation for the purchase or sale of
securities.
2.2 Need to know
2.2.1 Price sensitive information is to be
handled on a "need to know" basis, i.e., price sensitive information
should be disclosed only to those within the organisation/firm who need the
information to discharge their duty and whose possession of such information
will not give rise to a conflict of interest or appearance of misuse of the
information.
2.3 Limited access to
confidential information
2.3.1 Files containing confidential information
shall be kept secure. Computer files must have adequate security of login and
password etc.
2.4 Chinese wall
2.4.1 To prevent the misuse of confidential
information the organization/firm. shall adopt a "Chinese wall"
policy which separates those areas of the organization/firm which routinely
have access to confidential information considered "inside areas"
from those areas which deal with sale/ marketing/investment advice or other
departments providing support services, considered "public areas".
2.4.2 The employees in the inside area shall not
communicate any price sensitive information to anyone in public area.
2.4.3 The employees in inside area may be
physically segregated from employees in public area.
2.4.4 Demarcation of the various departments as
inside area may be implemented by the organization/firm.
2.4.5 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 compliance officer.
3.0 Pre-clearance of trades
:
3.1 Employees/directors/partners shall not
use price sensitive information to buy or sell securities of any sort, whether
for their own account, their relative's account, organisation/firm's account or
a client's account. The following trading restrictions shall apply for trading
in securities
3.2 Pre‑clearance of
trades :
3.2.1 All directors/officers/designated employees
of the organisation/firm who intend to deal in the seucrities of the client
company (above a minimum threshold limit to be determined by the
organisation/firm) shall pre‑clear the transactions as per the pre‑dealing
procedure as described hereunder.
3.3.2 An apphation may be made in such form as
the organisation/firm may specify in this regard, to the compliance officer
indicating the name and estimated number of securities that the designated
employee/director/partner intends to deal in the details as to the depository
with which he has a security account, the details as to the securities in such
depository mode and such other details as may be required by any rule made by
the organisation/firm in this behalf.
3.4 An undertaking shall be executed in
favour of the organisation/firm. by such designated employee/partners/directors
incorporating, inter alia, the following clauses, as may be applicable :
(i) That the designated
employee/director/partner does not have any access or has not received any
"price sensitive information" up to the time of signing the
undertaking.
(ii) That in case the designated
employee/director/partner has access to or receives "price sensitive
informaiton" after the signing of the undertaking but before the execution
of the transaction he/she shall inform the compliance officer of the change in
his position and that he/she would completely refrain from dealing in the
securities of the client company till the time such information becomes public.
(iii) That he/she has not contravened the code
of conduct for prevention of insider trading as specified by the
organisation/firm from time to time.
(iv) That he/she has made a full and true
disclosure in the matter.
4.0 Restricted/grey list
4.1 In order to monitor Chinese wall
procedures and trading in client securities based on inside informaiton, the
organisation/firm shall restrict trading in certain securities and designate
such list as restricted/grey list.
4.2 Security of a listed company shall be
put on the restricted/grey list if the organisation/firm is handling any
assignment for the listed company or is preparing appraisal report or is
handling credit rating assignments and is privy to price sensitive information.
4.3 any security which is being purchased or
sold or is being considered for purchase or sale by the organisation/firm on
behalf of its clients/schemes of mutual funds, etc. shall be put on the
restricyted/grey list.
4.4 As the restricted list itself is a
highly confidential information it shall not be communicated directly, or
indirectly to anyone outside, the organisation/ firm. The restricted list shall
be maintained by compliance officer.
4.5 When any securities are on the
restricted list, trading in these securities by designated
employees/directors/partners may be blocked or may be dis‑allowed at the
time of pre‑clearance.
5.0 Other restrictions
5.1 All directors/designated
employees/partners shall execute their order within one week after the approval
of pre‑clearance is given. If the order is not executed within one week
after approval is given, the employee/director/partners must pre‑clear
the transaction again.
5.2 All directors/officers/designated
employees/partners shall hold their investments for a minimum period of 30 days
in order to be considered as being held for investment purposes.
5.3 The holding period shall also apply to
purchases in the primary market (IPOs). In the case of 1POs, the holding period
would commence when the securities are actually allotted.
5.4 In case the sale of securities is necessitated
by personal emergency, the holding period may be waived by the compliance
officer after recording in writing his/her reasons in this regard.
5.5 Analysts, if any, employed with the
organisation/firm while preparing research reports of a client company(s) shall
disclose their share holdings/interest in such company(s) to the compliance
officer.
5.6 Analysts who prepare research report of
a listed company shall not trade in securities of that company for thirty days
from preparation of such report.
6. Reporting requirements
for transactions in securities
6.1 All directors/designated
employees/partners of the organisation/firm shall be required to forward
following details of their securities transactions including the statement of
dependent family members (as defined by the organisation/firm) to the
compliance officer ‑
(a) all holdings in securities by
directors/officers/designated employees /partners at the time of joining the
organisation,
(b) periodic statement of any transactions
in seucrities (the periodicity of reporting may be defined by the firm or
organisation). The organisation/firm may also be free to decide whether
reporting is required for trades where pre‑clearance is also required;
(c) annual statement of all holdings in
securities.
6.2 The compliance officer shall maintain
records of all the declarations given by the directors/designated
employees/partners in the appropriate form for a minimum period of three years.
6.3 The compliance officer shall place
before the chief executive officer/ partner or a committee notified by the
organisation/firm, on a monthly basis all the details of the dealing in the
securities by designated employees/directors/partners of the organisation/firm
and the accompanying documents that such persons had executed under the pre‑dealing
procedure as envisaged in this code.
7.0 Penalty for
contravention of code of conduct
7.1 Any employee/partner/director who trades
in securities or communicates any information or counsel any person trading in
securities, in contravention of the code of conduct may be penalised and
appropriate action may be taken by the organisation/firm.
7.2 Employees/partners/directors of the
organisation/firm, who violate the code of conduct may also be subject to
disciplinary action by the company, which may include wage freeze, suspension,
etc.
7.3 The action by the organisation/firm
shall not preclude SEBI from taking any action in the case of violation of the
SEBI (Prohibition of Insider Trading) Regulations, 1992.
8.0 Information
to SEBI in case of violation of SEBI (Prohibition of Insider Trading)
Regulations
8.1 In case it is observed by the
organisation/firm/compliance officer that there has been a violation of these
regulations, the SEBI shall be informed by the organisation/firm.
9.0 Listed intermediaries to
comply with both Parts A and B of Schedule I.
9.1 The intermediaries such as credit rating
agencies, asset‑management companies, or broking companies etc. whose
securities are listed in recognised stock exchange shall comply with both Part
A and Part B of this Schedule in respect of its own securites and client's
securities.
[See under regulation 12(2)]
1.0 Corporate disclosure policy
1.1 To ensure timely and adequate disclosure
of price sensitive information, the following norms shall be followed by listed
companies :
2.0 Prompt disclosure of
price sensitive information
2.1 Price sensitive information shall be
given by listed companies to stock exchanges and disseminated on a continuous
and immediate basis.
2.2 Listed companies may also consider ways
of supplementing information released to stock exchanges by improving investor
access to their public announcements.
3.0 Overseeing and co‑coordinating
disclosure
3.1 Listed companies shall designate a
senior official (such as compliance officer) to oversee corporate disclosure.
3.1.1 This official shall be responsible for
ensuring that the company complies with continuous disclosure requirements,
overseeing and co‑ordination disclosure of price sensitive information to
stock exchanges, analysts, share‑holders and media, and educating staff
on disclosure policies and procedure.
3.1.2 Information disclosure/dissemination may
normally be approved in advance by the official designated for the purpose.
3.1.3 if information is accidentally disclosed
without prior approval, the person responsible may inform the designated
officer immediately, even if the information is not considered price sensitive.
4.0 Responding to market rum
ours
4.1 Listed companies shall have clearly laid
down procedures for responding to any queries or requests for verification of
market rum ours by exchanges.
4.2 The official designated for corporate
disclosure shall be responsible for deciding whether a public announcement is
necessary for verifying or denying rum ours and then making the disclosure.
5.0 Timely reporting of
shareholdings/ownership and changes in ownership
5.1 Disclosure of shareholdings/ownership by
major shareholders and disclosure of changes in ownership as provided under any
regulations made under the Act and the listing agreement shall be made in a
timely and adequate manner.
6.0 Disclosure/dissemination
of price sensitive information with special reference to analysts,
institutional investors
Listed companies should
follow the guidelines, given hereunder while dealing with analysts and
institutional investors
(i) Only public
information to be provided
Listed companies shall
provide only public information to the analyst/ resarch persons/large investors
like institutions. Alternatively, the information given to the analyst should
simultaneously be made public at the earliest.
(ii) Recording of
discussion :
In order to avoid misquoting
or misrepresentation, it is desirable that at least two company representative
be present at meetings with analysts, borkers or institutional investors and
discussion should preferably be recorded.
(iii) Handling of
unanticipated questions:
A listed company should be
careful when dealing with analysts' questions that raise issues outside the
intended scope of discussion. Unanticipated questions may be taken on notice
and a considered response given later. If the answer includes price sensitive
information, a public announcement should be made before responding.
(iv) Simultaneous release of
information
When a company organizes
meetings with analysts, the company shall make a press release or post relevant
information on its website after every such meet. The company may also consider
live web casting of analyst meets.
7.0 Medium of
disclosure/dissemination
(i) Disclosure/dissemination of information
may be done through various media so as to achieve maximum reach and quick
dissemination.
(ii) Corporates shall ensure that disclosure
to stock exchanges is made promptly.
(iia) Corporates may also facilitate disclosure
through the use of their dedicated internet website.
(iii) Company websites may provide a means of
giving investors a direct access to analyst briefing material, significant
background information and questions and answers.
(iv) The information filed by corporates with
exchanges under continuous disclosure requirement may be made available on the
company website.
8.0 Dissemination by stock
exchanges
(i) The disclosures made to stock exchanges
may be disseminated by the exchanges to investors in a quick and efficient
manner through the stock exchange network as well as through stock exchange
websites.
(ii) Information furnished by the companies
under continuous disclosure requirements, should be published on the website of
the exchange instantly.
(iii) Stock exchanges should make immediate
arrangement for display of the information furnished by the companies instantly
on the stock exchange website.