SEBI notifies New Insider Trading Regulations

Today, the Securities and Exchange Board of India (SEBI) has notified the new Insider Trading Regulations expanding the scope of connected persons, introducing new concepts such as generally available information and exemption for due diligence and streamlining disclosures..The insider trading norms are being overhauled after a 20-year gap, following the recommendations made by a committee under the chairmanship of Justice N. K. Sodhi. The Committee had submitted its report in December 2013 recommending a new set of insider trading regulations, which were approved by the SEBI Board in November, 2014..The new regulations are called Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 2015..Some important features of these regulations are:.Any person who is in frequent communication with the officers of the company will also be considered to be a “connected person”.The onus would be on the connected persons to establish that they were not in possession of unpublished price sensitive information (UPSI). If the person who is alleged to be in possession of UPSI is not connected to the company, the onus would be on SEBI.Under the new regulations, mere communication of UPSI would be punishable. Earlier, SEBI’s stand was that mere communication (without any trade) would not be proceeded against. Companies now have to be even more careful not to reveal UPSI selectively, say to analysts.Responding to a long-standing demand of the industry, SEBI has now introduced an exemption for companies to provide UPSI for the purpose of conducting due diligence.The new regulations also include three defenses to the charge of insider trading, which are: (1) inter-se, off market transactions between promoters, (2) Chinese walls and (3) trading plans..(Disclaimer: Vaneesa Agrawal, former legal officer of SEBI, assisted the Justice Sodhi Committee but views expressed are personal)