Guidance Note on SEBI (Prohibition of Insider trading) Regulations, 2015

The Securities and Exchange Board of India issued SEBI (Prohibition of Insider trading) Regulations, 2015 dated 15th January, 2015 which came into effect from 15th May, 2015. Subsequently, SEBI received certain queries from the stakeholders seeking guidance on the interpretation of some provisions of the regulations and SEBI has powers to issue such clarifications vide Regulation 11 of the SEBI (Prohibition of Insider trading) Regulations, 2015.

The queries and the solutions can be enumerated as below:

1.The stakeholders raised the query that whether the contra trade restriction as specified in clause 10 of Annexure B of the Insider trading regulations, 2015 which lays down the trading restriction in a period which shall not be less than six months shall also apply to the trading of the ESOPs and the sale of the shares so acquired.

The regulator clarified that trading in ESOPs shall not tentamount to ˜trading™except as provided under Chapter III of the aforesaid regulations but shall be bound by the other provisions of the regulations for the sale of the shares so acquired under ESOP scheme.

2.The stakeholders have sought clarification that whether entering into Future & Option contract by the employee or director will be treated as contra trade after expiry and whether the reporting is also required to be made when the scrip of the company is a part of any index.

SEBI clarifies that any derivate contract that is cash settled shall be considered to be contra trade and trading into such derivatives when the scrip is a part of the index of the company need not be reported.

Any trading under the trading plan can take place only to the extent and manner as specified in the plan except for in the case of the pledging of the securities. 

Further, contra trade restrictions shall not apply to the designated persons in the listed companies in the case of buy-back, bonus issues, right issues etc. and the contra trade restriction shall apply to all as specified under Regulation 10 of the SEBI (Prohibition of Insider trading) Regulations, 2015.

3.The stakeholders further had sought clarifications that whether creation of pledge or invocation of pledge is allowed when the trading window is closed.

SEBI clarifies that the pledgor or pledgee may demonstrate that the creation of pledge or invocation of pledge was bona fide and prove their innocence under proviso to sub-regulation (1) of regulation 4 of the Regulations.  

Please access to the below link to read the guidance on these regulations.

Guidance Note on SEBI (Prohibition of Insider trading) Regulations, 2015



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