Master Circular dated September 23, 2024 on Surveillance of Securities Market is updated to incorporate provisions of three circulars: Framework of Financial Disincentives for Surveillance Related Lapses at Market Infrastructure Institutions (SEBI/HO/ISD/ISD-PoD-1/P/CIR/2024/73 dated June 06, 2024); Allowing subscription to the issue of Non-Convertible Securities during trading window closure period (SEBI/HO/ISD/ISD-PoD-2/P/CIR/2024/180 dated December 30, 2024); and Extension of automated implementation of trading window closure to Immediate Relatives of Designated Persons on account of declaration of financial results (SEBI/HO/ISD/ISD-PoD-2/P/CIR/2025/55 dated April 21, 2025). All circulars listed in the Appendix stand rescinded to the extent they relate to Surveillance of Securities Market. Actions taken, applications pending, and rights, obligations and liabilities under rescinded circulars are preserved.

The Master Circular consolidates five subject areas. The following three are carried forward unchanged from the prior Master Circular: Trading Rules and Shareholding in Dematerialised Mode; Monitoring of Unauthenticated News Circulated by SEBI Registered Market Intermediaries; and Disclosure Reporting under the SEBI (Prohibition of Insider Trading) Regulations, 2015 (covering Regulations 6, 7, 8, and 9, system-driven disclosures, and Code of Conduct violation reporting). The two subject areas below incorporate changes from the three new circulars.

Financial Disincentives for Surveillance Related Lapses at Market Infrastructure Institutions

A framework of Financial Disincentives for Surveillance Related Lapses (FDSRL) is introduced for Market Infrastructure Institutions (MIIs). A Surveillance Related Lapse (SRL) includes: any lapse in implementation of decisions taken in Surveillance Meetings; any lapse in discharge of surveillance activities as per agreed scope and timelines; and any inadequate or non-reporting of surveillance related activity as per agreed timelines. Financial disincentives are determined on the basis of total annual revenue of the MII and number of SRL instances in a Financial Year, as follows:

Upon identification of SRL, SEBI shall provide the concerned MII an opportunity to make submissions before imposing any financial disincentive. Financial disincentives, if imposed, shall be credited to SEBI-IPEF within 15 working days. MIIs shall disclose financial disincentive details on their websites and in annual reports. The FDSRL framework does not apply to matters with market-wide impact, causing losses to a large number of investors, or affecting market integrity; such matters are subject to proceedings under SCRA/SEBI Act/Depositories Act, 1996. The framework also does not apply to minor procedural lapses. The framework is without prejudice to SEBI’s right to initiate other actions under applicable laws.

Trading Window Closure

Trading window restrictions shall not apply to subscription to the issue of Non-Convertible Securities, Offer for Sale, and Rights Entitlements transactions, in addition to transactions already exempted under Clause 4(3)(b) of Schedule B read with Regulation 9 of PIT Regulations, carried out in accordance with the framework specified by the Board. Stock exchanges and depositories shall develop a system to restrict trading by Designated Persons (DPs) of listed companies and their Immediate Relatives during trading window closure period by freezing PAN at security level (PAN-ISIN freeze framework). This framework applies to trading window closure on account of declaration of financial results and covers on-market transactions, off-market transfers, and creation of pledge in equity shares and equity derivatives. For newly listed companies, PAN freezing shall commence from the first day of the second quarter following the quarter of listing. The Compliance Officer, DPs, and their Immediate Relatives shall continue to independently comply with PIT Regulations obligations till further communication. Depositories shall submit quarterly reports to SEBI in the format at Annexure 6.