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THE GAZETTE OF INDIA
EXTRA-ORDINARY PART II � SECTION 3 � SUB-SECTION (ii) PUBLISHED BY AUTHORITY SECURITIES AND EXCHANGE BOARD OF INDIA NOTIFICATION Mumbai, the 20th day of February 2002 SECURITIES AND EXCHANGE BOARD OF INDIA (INSIDER TRADING) (AMENDMENT) REGULATIONS, 2002 | |
S.O. 221E).- In exercise of the powers conferred by section 30 of the Securities and Exchange Board of India Act,1992 (15 of 1992), the Board hereby makes the following regulations to amend the Securities and Exchange Board of India (Insider Trading) Regulations,1992.
(ii) for the word `the� appearing after the words ` securities of�
and before the word `company�, the word `a�, shall be substituted.
"(viii) relatives of the connected person;
The following shall be deemed to be price sensitive information:-
(f) For clause (k) the following clause and explanation shall be
substituted; namely;-
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company shall deal in the securities of another company or associate of that other company while in possession of any unpublished price sensitive information."
(i) The words, "or communicate any information or counsels any person dealing in securities", shall be omitted. (ii) The words and figure "or 3A" shall be inserted after the word and figure, "regulation 3,"
4A(1) If the Board suspects that any person has violated any provision of these regulations, it may make inquiries 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 11 for the purpose of sub-regulation (1)."
"9(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 has 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 of the provisions of the Act, the Regulations
made thereunder including the issue of directions under regulation 11."
POLICY ON DISCLOSURES AND INTERNAL PROCEDURE FOR PREVENTION OF INSIDER TRADING "12. Code of internal procedures and conduct for listed companies and other entities.
Initial Disclosure:
(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 lac in value or 5000 shares or 2% of total shareholding or voting rights, whichever is lower. (5) The disclosure mentioned in sub-regulations (3) and (4) shall be made within 4 working days of;
(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. (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, 11B or action under Chapter VIA or section 24 of the Act. " SCHEDULE I [ Under regulation � 12(1) ] PART � A Model Code of Conduct for Prevention of Insider Trading for Listed Companies
1.0 Compliance Officer 1.1 The listed company has appointed a compliance officer (senior level employee) who shall report to the Managing Director/Chief Executive Officer. 1.2 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:-
(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. 1.4 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" 2.1 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 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 company who need the information to discharge their duty. 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 pass word etc. 3.0 Prevention of misuse of "Price Sensitive Information 3.1 All directors/ officers 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 un-published. 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:-
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 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 clauses, as may be applicable:
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 investments 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 personal 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 transactions 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:
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 penalised 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, suspension, ineligibility for future participation in employee stock option plans, etc. 6.3 The action by the company shall not preclude SEBI from taking any action in case of violation of 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 SEBI (Prohibition of Insider Trading) Regulations, 1992, SEBI shall be informed by the company. Model Code of Conduct for Prevention of Insider Trading for Other Entities 1.0 Compliance Officer
1.1 The organisation/firm has a compliance officer (senior level employee) reporting to the Managing Partner / Chief Executive Officer.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.3.0 Prevention of misuse of Price Sensitive Information
3.2 Pre clearance of trades 3.2.1 All directors/officers /designated employees of the organisation/ firm who intend to deal in the securities 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 application 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. 3.3.3 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 :
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 restricted/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
5.2 All directors/officers /designated employee 5.3 The holding period shall also apply to purchases in the primary market (IPOs). In the case of IPOs, 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. 6.1 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:-
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. 7.1 Any employee / partner / director who trades in securities or communicates any information or counsels 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.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, SEBI shall be informed by the organisation / firm.9.0 Listed intermediaries to comply with both part A and B of Schedule I.
[ see under regulation 12(2) ] CODE OF CORPORATE DISCLOSURE PRACTICES FOR PREVENTION OF INSIDER TRADING 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-ordinating disclosure 3.1 Listed companies shall designate a senior official (such as compliance officer) to oversee corporate disclosure. 3.2 This official shall be responsible for ensuring that the company complies with continuous disclosure requirements, overseeing and co-ordinating disclosure of price sensitive information to stock exchanges, analysts, shareholders and media, and educating staff on disclosure policies and procedure. 3.3 Information disclosure/ dissemination may normally be approved in advance by the official designated for the purpose. 3.4 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 rumours 4.1 Listed companies shall have clearly laid down procedures for responding to any queries or requests for verification of market rumours 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 rumours 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:- Listed companies shall provide only public information to the analyst/ research persons/ large investors like institutions. Alternatively, the information given to the analyst should be simultaneously 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, brokers 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 organises 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 webcasting of analyst meets.
(i) Disclosure/ dissemination of information may be done through various media so as to achieve maximum reach and quick dissemination.8.0 Dissemination by stock exchanges
[ F.No.SEBI/LE/ 2180 /2002] D.R.MEHTA CHAIRMAN SECURITIES AND EXCHANGE BOARD OF INDIA
FOOT NOTE :
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