Worried about complying with SEBI’s new regulations on insider trading?
You have good reason to be! Here’s why:

“With effect from April 01, 2019, “structured digital database”containing the names of such persons or entities as the case may be with whom information is shared under this regulation along with the Permanent Account Number or any other identifier authorized by law where Permanent Account Number is not available. Such databases shall be maintained with adequate internal controls and checks such as time stamping and audit trails to ensure non-tampering of the database.”

Regulation 3(5) of SEBI (Prohibition of Insider Trading) Regulations, 2015, with Amendment Regulations announced in 2018.

Indian laws pertaining to the prohibition of insider trading have been evolving over the past few years. SEBI has issued substantive regulatory requirements relating to insider trading in its Prohibition of Insider Trading Regulations (2015) as quoted above. Further, these laws are only being strengthened in the subsequent Amendment Regulations, like the 2018 amendments. With SEBI’s increasing emphasis on enforcing its regulations, Companies now need to urgently review their compliance processes.

Given that SEBI now also has enhanced powers to take penal action against companies that do not comply, it would be prudent for senior stakeholders and company management to take serious note of the new requirements for compliance.

What do companies that don’t comply stand to lose?

SEBI’s approach to insider information is stringent. The onus lies on insiders to prove that there was no misuse of privileged information during any trade that they have carried out. Mere possession of inside information at the time of trading can be considered as a ground for regulatory violation.

Currently, Compliance Officer and Insiders need to watch out for two types of offences in this context:

  • Trading Offence : An insider (person with privileged information, not available to general public) may be liable to be booked for this offense if he or she has engaged in trading while in possession of UPSI (Undisclosed Price Sensitive Information)
  • Communication Offense : An insider may be liable to be booked for this offense if he or she is found to have disclosed UPSI to another individual, except for a legitimate purpose or as required for performance of duty or discharge of legal obligations.

Risk Mitigation & Assurance for Compliance Officer
The need of the hour

The need of the hour is an automated digital solution which will comply with SEBI’s guidelines for a structured digital database of persons with insider information, which also has adequate security controls to ensure non-tamperability. At Axar Digital Services, we have designed a robust and secure web-based Insider Trading Management System (ITMS) called InsiderLens, to help mitigate risk for Compliance Officers as well as Insiders and Company Stakeholders.

So, don’t waste any more time thinking about how to implement such a solution or the cost of deployment! What you need is:

  • Automated digital solution for structured digital database of persons with insider information.
  • Adequate security controls to ensure non-tamperability.
  • Keep track of UPSI with zero delay from the moment sensitive information is discussed by Designated Persons (DP’s).
  • Keep track of every single person exposed to UPSI DP’s as well as Connected Persons (CP’s) including Close Relations (CR’s) and Maintained Financial Relations (MFR’s).
  • Maintain track of any trading activity till time of public disclosure of the UPSI.
  • Flag off any mismatch in Benpos provided by the RTA.

How InsiderLens helps mitigate risk of regulatory action

InsiderLens is an insider trading compliance platform which can be used by Compliance Officer to effectively manage and regulate several processes which may impact fair trading. The use of an ITMS platform helps insulate compliance officer from legal or regulatory actions in case of violations by Insiders or Connected Persons. The platform ensures adherence to best trading practices and helps the Compliance Officer, as well as senior management, gain peace of mind in terms of compliance with regulations.

InsiderLens : Key Features

Alert for window closure to all Designated Persons

BenPos reconciliation

Recording of declarations by Designated Persons

Easy reporting of trades and disclosures

Timely alerts and reminders to prevent Insiders from trading in violation of the Regulations.

Keeping track of trade intimations and trade requests

Two-factor authentication for ensuring database security

Generates various reports such as Insider Report, Changes in Holding and Periodical Disclosure Report, Quarterly Monitoring Report and Deviation Report and more.

Security

  • UPSI data encryption & role-based authentication.
  • Role-based access control allows access to content only to authorized users
  • Idle session deletion & timeout
  • Ability to disallow multiple sessions
  • Administrators have strict control over creation of new users in the application

Hosting Options

On premise

Hosted in your in-house server, allowing you full control of your data. Involves investment in dedicated hardware, operating platform and database licenses.

On Cloud

Hosting on your preferred Cloud solution provider. Payment based on annual maintenance charges.

Understanding Regulatory Terminologies

Insider: A “designated person”, “connected person” or a person possessing or having access to Unpublished Price Sensitive Information (UPSI)

Designated Person: One who has been associated with the company in any capacity such as a director, promoter, officer or employee or in a contractual or fiduciary relationship with the company; and includes a list of “deemed designated persons”.

Connected Person: Any person who is or has been associated with the Company during six months prior, in any capacity and has direct or indirect access to Unpublished Price Sensitive Information (UPSI)

Unpublished Price Sensitive Information (UPSI): Any information relating to securities of a company that is not generally available and, upon being available, is likely to materially affect the price of the company’s securities. It includes matters such as financial results, dividends, changes in capital structure, significant corporate transactions and changes in key managerial personal.

Source: SEBI (Prohibition of Insider Trading) Regulations, 2015.

Best Practices for Insider Trading Prevention

  • Deploy best-in-class digital compliance platform specifically designed to ensure compliances with SEBI’s PIT regulations
  • Ensure that the digital platform is created by companies with proven knowledge and expertise in the field.
  • Create and distribute a stringent Code of Conduct for trading among employees, management and company stakeholders and designate an officer to ensure adherence to the Code of Conduct.
  • Tightly control information during sensitive windows like board meetings or company negotiations for major transactions.
  • Use trading plans and Chinese walls to defend against violations.
  • Prepare a plan of action to follow in case of leakage of sensitive information or violation of trading window closures, so that quick action can be taken.

Axar - the last word on Insider Trading Prevention

Insider trading prevention is crucial for the growth and development of the capital markets and at Axar Digital Services, we’re doing our best to help you comply with Prohibition of Insider Trading Regulations. We believe in helping clients to meet the highest possible standards of corporate governance and transparency in information disclosures. Relevant information about a company should be equally available to all participants in trading – this means that those with privileged information cannot be allowed to trade publicly before the information becomes available to all participants to allow for fair trading.

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Office No. 9, 2nd Floor, L-Square, Sanghavi Nagar, Aundh Pune-411007.

Phone

+91 9172796451
+91 9810860253

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