Compliance Requirements under the Regulations

1. Code of Fair Disclosure and Conduct (Regulation 8)

Board of directors of every listed company shall formulate and publish its code of practices and procedures for fair disclosure of unpublished price sensitive information that it would follow in order to adhere to principles set out in Sch A to PIT regulations.

Every such code of practices and procedures for fair disclosure of unpublished price sensitive information and every amendment thereto shall be promptly intimated to the stock exchanges where the securities are listed.

 

     2. Code of Conduct (Regulation 9)

Board of directors of a listed company shall formulate a code of conduct to regulate, monitor & report trading by designated persons & their immediate relatives, ensuring compliance with reg. & min. standards in Sch B (listed cos) or Sch C (intermediaries).

• • For the avoidance of doubt it is clarified that intermediaries, which are intermediary must ensure CO/D code of conduct to regulate, monitor and report trading by their designated persons, by adopting the minimum standards set out in Schedule B with respect to trading in their own securities and in Schedule C with respect to trading in other securities.
  • Board of directors or head(s) of organisation, of every other person who is required to handle UPSI in the course of business operations shall formulate a code of conduct to regulate, monitor and report trading by their designated persons and immediate relatives of designated persons towards achieving compliance with these regulations, adopting the minimum standards set out in Schedule C to these regulations, without diluting the provisions of these regulations in any manner
    
    

     3. Appointment of Compliance Officer for Administration of Code of Conduct (Regulation 9(3))

Every listed company, intermediary and other person formulating a code of conduct shall identify and designate a compliance officer to administer the code of conduct and other requirements under PIT regulations.

BOD or such other analogous authority shall in consultation with compliance officer specify designated persons to be covered by code of conduct on basis of their role & functional designation in access that is considered to access UPSI and include:

a) Employees of listed company/material subsidiaries of listed companies/intermediary/fiduciary designated on basis of their functional role & access to UPSI

b) All promoters of listed companies and promoters who are individuals or investment companies for intermediaries or fiduciaries

c) CEO & employees up to 2 levels below CEO of such listed company, intermediary, fiduciary and material subsidiaries irrespective of their functional role in the company or ability to have access to UPSI

d) Any support staff of listed company, intermediary or fiduciary such as IT staff or secretarial staff who have access to UPSI

 

     4. Institutional Mechanism for Prevention of Insider Trading (Regulation 9A(1),(2))

The Chief Executive Officer, Managing Director or such other analogous person of a listed company, intermediary or fiduciary shall put in place adequate and effective system of internal controls to ensure compliance with the requirements given in PIT regulations to prevent insider trading.

Internal controls shall include the following:

a) all employees who have access to UPSI are identified as designated persons

b) all UPSI shall be identified and its confidentiality shall be maintained as per PIT regulations

c) adequate restrictions shall be placed on communication or procurement of UPSI

d) lists of all employees and other persons with whom UPSI is shared shall be maintained and confidentiality agreements shall be signed or notice shall be served to all such employees and persons

e) all other relevant requirements specified under these PIT Regulations shall be complied with

f) periodic process reviews to evaluate effectiveness of such internal controls

 

     5. Audit Committee to Review the Compliances Related to Internal Control Mechanism on Annual Basis (Regulation 9A(4))

The Audit Committee of a listed company or other analogous body for intermediary or fiduciary shall review the compliance with the provisions of these regulations at least once in a financial year and shall verify that the systems for internal control are adequate and are operating effectively.

 

     6. Formulation of Written Policies and Procedures for Inquiry in Case of Leak of UPSI (Regulation 9A(5))

Every listed company shall formulate written policies & procedures for inquiry in case of leak/suspected leak of UPSI, which shall be approved by Company’s BOD and accordingly initiate appropriate inquiries on becoming aware of leak/suspected leak of UPSI. The Board shall also be promptly informed of such leaks, inquiries and results of such inquiries.

 

      7. Whistle-Blower Policy (Regulation 9A(6))

The listed company shall have a whistle-blower policy and make employees aware of such policy to enable employees to report instances of leak of unpublished price sensitive information.

 

      8. Intimation of Closure of Trading Window (Schedule B (4)(2))

Trading window shall be closed when the Compliance Officer determines that a designated person or immediate relatives of designated person can reasonably be expected to have possession of UPSI. Trading window shall be closed from end of every quarter till 48 hours after the declaration of financial results. The listed company shall intimate the trading window commencement and closure date at least 2 trading days prior to the commencement of trading window closure date (T-2 days).

 

 

Penalty & Punishment

 

Reg 10 provides that any contravention under the PIT Regulations shall be dealt by SEBI as per SEBI Act, 1992.

 

Sec 15A of SEBI Act:

If any person, who is required under this Act or any rules or regulations made thereunder,—

(a)  to furnish any document, return or report to the Board, fails to furnish the same [or who furnishes or files false, incorrect or incomplete information, return, report, books or other documents], he shall be liable to [a penalty [which shall not be less than one lakh rupees but  which  may  extend  to  one  lakh  rupees  for  each  day  during  which  such failure continues subject to a maximum of one crore rupees 

(b)  to file any return or furnish any information, books or other documents within the time specified therefor in the regulations, fails to file return or furnish the same within the time specified  therefor  in  the  regulations [or  who  furnishes  or  files  false,  incorrect  or incomplete information, return, report, books or other documents, he shall be liable to penalty which shall not be less than one lakh rupees but which may extend to one lakh rupees for each day during which such failure continues subject to a maximum of one crore rupees.

(c)  to maintain books of account or records, fails to maintain the same, he shall be liable to a penalty which shall not be less than one lakh rupees but which may extend to one lakh rupees for each day during which such failure continues subject to a maximum of one crore rupees

 

 

Section 15 G: Penalty for insider trading-

If an Insider deals in company’s securities on the basis of UPSI, communicates to or procures from any person, UPSI, he sahll be liable to a penalty which shall not be less than ten lakh rupees but which may extend to twenty-five crore rupees or three times the amount of profits made out of insider trading, whichever is higher

 

 

Section 15HB: Penalty for contravention where no separate penalty has been provided-  

Whoever fails to comply with any provision of this Act, the rules or the regulations made or directions issued by the Board thereunder for which no separate penalty has been provided, shall be liable to a penalty which shall not be less than one lakh rupees but which may extend to one crore rupee