SEBI eases trading rules for company insiders, offers flexibility

Indian market regulator SEBI has revised the 'trading plans' framework for company insiders who consistently possess unpublished price-sensitive information (UPSI). The updated rules aim to facilitate compliant trading for senior management and Key Managerial Personnel (KMP).

SEBI eases norms

Under the new guidelines, the minimum cool-off period between the disclosure and implementation of a trading plan has been reduced from six months to four months. Consequently, trading plans can now be executed six months after their public disclosure.

Insiders now have the option to set upper and lower price limits for buy and sell trades, respectively, within a ±20% range of the closing price on the submission date of the trading plan. If the security's price falls outside these limits, the trade will not proceed.

Once a trading plan is approved, the compliance officer must notify the stock exchange(s) within two trading days and disclose the set price limits. If the plan is not fully or partially implemented due to a lack of liquidity, the insider must inform the compliance officer within two trading days post-plan expiry, providing reasons and supporting documents.

The compliance officer will present this information to the Audit Committee at its next meeting. The committee will determine if the non-implementation was justified. If the committee rejects the reasons, the compliance officer will follow the Code of Conduct to take appropriate action, and notify the stock exchanges on the same day.

These changes, coming into effect 90 days after their publication in the Official Gazette, amend the insider trading rules. The regulatory framework aims to prevent trading influenced by UPSI not accessible to the public, allowing insiders to trade only if they comply with the new provisions and do not possess UPSI at the time of trading.

Sebi's revision follows a consultation paper issued in November 2023 to simplify trading processes for company officials with frequent access to UPSI.

[With PTI inputs]

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