SEBI’s ‘habit changing’ Prohibition of Insider Trading (PIT) Regulations
Misconception 1 – UPSI data entry is CS’ responsibility
August 9, 2023
Under SEBI’s PIT Regulations, 2018, it is mandatory for companies with listed papers to create and maintain a Structured Digital Database (SDD) to track every instance of Unpublished Price Sensitive Information (UPSI) from its birth to its closure or disclosure.
It is a misconception (among others) that the entry and tracking of UPSI are to be done by the Company Secretary (CS) / Compliance Officer (CO) of the company.
Factually, the CO is undoubtedly responsible – but not for entering the UPSI into the SDD. He (or she) is responsible for ensuring that the SDD software solution exists, it is usable by all the Designated Persons (DPs) of the company, and they are all trained in the usage of the solution – starting with entering UPSI into it. The training commences with entering UPSI into the solution and exposes all DPs to their responsibilities under regulations.
The DP must create an entry of the UPSI at the occurrence of its first instance. When s/he enters ‘what’ the UPSI is, s/he must also enter the following four other parameters –
1. Whom s/he shared it with
2. When s/he shared it
3. Why s/he shared it, and
4. What UPSI category it is to be classified in
2. When s/he shared it
3. Why s/he shared it, and
4. What UPSI category it is to be classified in
Finally, s/he makes a formal declaration that s/he has voluntarily taken responsibility to ensure complete and correct disclosure of the UPSI. Each time the UPSI is shared a similar entry must be made by the sharer.
The SDD solution must ensure that notification of this entry into the SDD reaches the CO instantaneously. Instantly, the CO must ensure that all people who possess the UPSI are sent a Trading Window Closure (TWC) Notice and later may add the Trading Window Open date and time. The DPs and Connected Persons (CPs) who possess the UPSI must subsequently be continually made aware, in their account on the SDD software, that they are under a TWC and must not trade in the listed papers of the company. All these tasks confirm the perfect addressing of the most fundamental regulatory need.
As a good practice, it is best to have a comprehensive solution addressing all the other compliance requirements within the regulations. InsiderLens from Axar incorporates this understanding fully and properly.