SEBI issues comprehensive 58 FAQs on SEBI Prohibition of Insider Trading Regulations 2015

SEBI issues comprehensive 58 FAQs on SEBI (Prohibition of Insider Trading) Regulations, 2015

These Frequently Asked Questions on SEBI (Prohibition of Insider Trading) Regulations, 2015 include all previous guidance note and FAQs issued till date and also provides clarification on several evolving issues. The FAQs have been classified under various headings, namely, trading, structured digital database, disclosures, pledge, trading plan, pre-clearance, trading window closure, contra-trade, etc.

SEBI FAQs on Insider Trading Regulations

Trading Related

1. Question Whether creation of pledge, invocation of pledge and revocation of pledge can be deemed as trading?

Answer: Trading as defined under Regulation 2 (1) (l) means and includes subscribing, buying, selling, dealing, or agreeing to subscribe, buy, sell, deal in any securities, and “trade” shall be construed accordingly. The term trading is widely defined to include dealing in securities and intended to curb the activities based on unpublished price sensitive information (UPSI) which are strictly not buying, selling or subscribing, such as pledging etc. Hence, trading would include creation/invocation/revocation of pledge.

2. Question Whether trading only in equity shares is in violation of PIT Regulation while in possession of UPSI or it also includes trading in other form of securities?

Answer: Trading in securities while in possession of UPSI is prohibited as per the regulations. For the applicability of SEBI (PIT) Regulations, securities shall have the same meaning assigned to it under the Securities Contracts (Regulation) Act, 1956, which inter-alia covers shares, scrips, stocks, bonds, debentures, derivative, etc. except units of mutual funds.

3. Question Whether trading on the basis of UPSI is prohibited even for persons not falling under the definition of ‘Designated Persons’ under the PIT Regulations?

Answer: Regulation 2(1) (g) of SEBI (PIT) Regulations, 2015 defines ‘insider’ as any person who is:

(i) a connected person; or

(ii) in possession of or having access to unpublished price sensitive information. Therefore, even if a person is not classified as a designated person, having access to UPSI would make such a person an ‘insider’. As per Regulation 4(1) of SEBI (PIT) Regulations, 2015, an insider is prohibited to trade while in possession of UPSI.

4. Question Are PIT Regulations applicable on transmission of shares?

Answer Yes, PIT Regulations are applicable on transmission of shares . However, they are exempted from provisions of trading window closure, pre -clearance and contra trade, but the norms relating to disclosure requirements shall be applicable on transmission of Shares.

Structured Digital Database

5. Question : Whether the requirement to maintain structured digital database under Regulation 3(5) is applicable on intermediaries and fiduciaries?

Answer The requirement to maintain structured digital database under Regulation 3(5), containing the names of such persons or entities with whom UPSI is shared, is applicable to listed companies, and intermediaries and fiduciaries who handle UPSI of a listed company in the course of business operations.

6. Question : What information should a listed company maintain in its structured digital database under Regulation 3(5), in case the designated person is a fiduciary or intermediary?

Answer: The listed company should maintain structured digital database internally, which shall contain information including the following:
(i) Details of the Unpublished Price Sensitive Information (UPSI)
(ii) Details of persons with whom such UPSI is shared (along with their PANs/other unique identifier) and details of persons who have shared the information.
Similarly, another structured digital database should be maintained internally by fiduciary or intermediary, capturing information as mentioned above at point (i) and (ii), in accordance with Regulation 9A (2)(d) and as required under Schedule C.
For example: The listed company (X) has appointed a Law firm or Merchant Banker (Y) in respect of fund raising activity and (A) from listed company has shared the said UPSI with (B) of Law firm or Merchant Banker. The structured digital database of (X) should capture the nature of UPSI shared, details of (A), (Y) and (B), along with their PAN or other unique identifier (in case PAN is not available).
The Law firm or the Merchant Banker (Y) shall in turn maintain another structured digital database internally capturing the nature of UPSI received/shared, details of (X), (A) and (B) along with their PAN or other unique identifier (in case PAN is not available), in accordance with Regulation 9A(2)(d) and as required under Schedule C.]

7. Question If the structured digital database is maintained on Amazon, Google or cloud server hosted outside India, will it be considered as outsourced or internal?

Answer: Databases/servers provided by third party vendors whether within India or outside India will be considered as outsourced.

8. Question Regulation 3(5) requires structured digital database shall not be outsourced and shall be maintained internally with adequate internal controls and checks. Whether a listed company can use software provided by third party vendors, wherein the server is of the vendor but requisite entries are made by the employees of the company only.

Answer: The third party vendors are providing the services/software on login basis, where the server is maintained by the vendor. Therefore, the vendor may have access to such records which would be contrary to the regulations with respect to maintenance of structured digital database.

9. Question Does list of UPSI as prepared by the company in-house needs to be disseminated to public at large?

Answer No, there is no requirement to disseminate the list of UPSI on the website of the company.

10. Question: Are companies required to maintain this structured digital database even when the information is shared only within the company?

Answer: Yes, irrespective of the fact that information is shared within or outside the Company, requisite records shall be updated in structured digital database as and when the information gets transmitted.

11.Question: Nominee directors sharing information to their bank or financial institution for legitimate purpose, will it be covered as communication of UPSI?

Answer: If the directors fall under the list of designated persons or as an insider, then sharing of UPSI by them for legitimate purpose with the Bank/FIs, would be considered as communication of UPSI. Accordingly, the same would be recorded in the SDD of the company.

12.Question: For how long the Company needs to maintain the data in its structured digital database?

Answer: As per Regulation 3(6) of SEBI (PIT) Regulations, the structured digital database shall be preserved for a period of not less than eight years after completion of the relevant transactions and in the event of receipt of any information from SEBI regarding any investigation or enforcement proceedings, the relevant information in the structured digital database shall be preserved till the completion of such proceeding.



(a) Whether SEBI’s intent is to prohibit creation of pledge, revocation of pledge5 or invocation of pledge for enforcement of security while in possession of UPSI?

(b) Whether creation of pledge, revocation of pledge5 or invocation of pledge is allowed when trading window is closed?

Answer: Yes. However, the pledgor or pledgee may demonstrate that the creation/revocation5 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.

14. Question : What should be the value of the pledge / revoke transaction for the purpose of disclosure? Is it the market value on date of the pledge / revoke transaction or is it the value at which the transaction has been carried out between the pledgor and pledgee? For instance, if the pledgor has availed a loan of Rs 10 Lacs against which he has pledged shares worth Rs 15 Lacs, would the transaction value be Rs 10 Lacs or Rs 15 Lacs.

Answer: For the purpose of calculation of threshold for disclosures relating to pledge under Chapter III of the Regulations, the market value on the date of pledge/revoke transaction should be considered. In the above illustration, the value of transaction would be considered as fifteen lakh rupees.

15.Question: If the lender sells the shares pledged by the designated person (shares acquired under ESOP by availing loan) to recover the loan then how to represent this transaction in Form C (i.e. invoke/revoke)?

Answer: When the lender sells the shares pledged by designated person, the transaction can be represented as invocation in Form C.

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