The Securities and Exchange Board of India (SEBI) on Wednesday revamped the ‘Prohibition of Insider Trading’ regulations with more stringent measures, aligning its norms with international practices.
The new rules, based on the Justice Sodhi Committee report, would replace the SEBI (Prohibition of Insider Trading) Regulations 1992.
“The new regulations strengthen the legal and enforcement framework, align Indian regime with international practices, provide clarity with respect to the definitions and concepts, and facilitate legitimate business transactions,” said SEBI in a press release after its board meeting here.
The definition of ‘insider’ has been made wider by including persons connected on the basis of being in any contractual, fiduciary or employment relationship that allows such person access to unpublished price sensitive information (UPSI).
However, SEBI said that directors, employees and all other persons in the deeming category covered under 1992 regulations would continue to be covered.
Insider will also include a person who is in possession or has access to UPSI. Now, “immediate relatives will be presumed to be connected persons, with a right to rebut the presumption.” In 1992 regulations, definition of connected person was largely position based.
Further in the case of connected persons the onus of establishing, that they were not in possession of UPSI, “shall be on such connected persons.”
A provision of ‘Trading Plans’ on the lines of the U.S. has been introduced for insiders with necessary safeguards. “Such a plan has to be for bonafide transactions and has to be disclosed on stock exchange platform in advance.”
DelistingAmending the SEBI (Delisting of Equity Shares) Regulations, 2009, the capital market regulator said delisting would be considered successful only when the shareholding of the acquirer together with the shares tendered by public shareholders reaches 90 per cent of the total share capital of the company.
It also needs to get at least 25 per cent of the number of public shareholders — holding shares in de-materialised mode as on the date of the board meeting which approves the delisting proposal — tender in the reverse book building process.
Further, the promoter/promoter group would be prohibited from making a delisting offer if any entity belonging to the group has sold shares of the company during a period of six months prior to the date of the board meeting which approves the delisting proposal.
It also said that companies, whose paid-up capital does not exceed Rs.10 crore and net worth does not exceed Rs.25 crore as on the last day of the previous financial year, are exempted from following the reverse book building process.
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Timeline for completing the delisting process has been reduced from 137 calendar days (about 117 working days) to 76 working days.
However, if the delisting attempt fails, the acquirer would be required to complete the mandatory open offer process under the Takeover Regulations and pay interest at 10 per cent per annum for the delayed open offer.
