Since it is more than 30 months since the regulation became mandatory, it is expected that SEBI will tighten checking, and penalties will likely increase on both companies and individuals, in the coming weeks.

How will SEBI examine compliance?

Questions SEBI could ask are simple:

• Has the company implemented an SDD?
• When was the SDD implemented?
• How far back does the data go in the SDD?
• Does the SDD software provide only UPSI-related or comprehensive compliance?
• Is the SDD implemented on the company’s own server?
• Does any entity other than the company or its own staff have any control on the server where the SDD is hosted?
• Does the company have its own clearly defined Code of Conduct regarding PIT Compliance?
• Have the company’s Secretarial Auditors reported on compliance with PIT regulations over the last 30 months?
• How many times have Secretarial Auditors reported non-compliance, if at all?
• Do the Secretarial Auditors have their own SDD implementation on their own server? 

Expected answers can be gleaned from various clarificatory declarations and circulars issued by SEBI from time to time, till as recently as August 2021. 

When could SEBI launch compliance inquiries?

SEBI, which we understand has just added more than 140 people in the last 2 quarters, should find it very effective to check PIT Compliance soon after Diwali.

What is the likely impact of non-compliance?

For any company that has not yet implemented an SDD, this quarter – October to December 2021 – is the best time window for implementing SDD. Delay beyond December 2021 could cause significant penalties. Over the past 2.5 years, anecdotal evidence indicates that the minimum penalty levied on companies was Rs 4 lakhs, and on individuals, it was Rs 1 lakh. 

The maximum penalty could go as high as Rs 25 crores or 3 times the amount of profits generated from the violative trades, whichever is higher.

What is the best remedy to avoid action by SEBI against your company?

Please do not take shortcuts, fudge, or obfuscate. It is easy to be found out. Delay may at worst lead to a penalty. This is far better than being caught in a falsehood. That could be a disaster. 

Absolutely the best action to prevent adverse action by SEBI – 

• contact Axar’s InsiderLens team
• organize and see the demo
• finalize pricing and get internal approval for implementation on a company-owned server
• acquire/ get the IT team to allocate a server
• implement InsiderLens on your server
• upload data starting right away and try to go as far back with past data as you can

Axar Digital Services was established by tech-savvy legal experts who sensed the gravity of SEBI’s PIT regulations and their periodic amendments. Hence, our InsiderLens software has a comprehensive set of features meant to help Compliance Officers (COs) and insiders in complying with SEBI regulations or your company Code of Conduct: 

• InsiderLens’ user-friendly interface makes it the best PIT compliance software in India
• a centralized Structured Digital Database (SDD) of UPSI for all persons with insider information.
• loaded with extensive security controls to prevent any form of information tampering.
• tracks UPSI from the moment it is entered into the SDD by Designated Persons (DP’s) and shared with other DPs and Connected Persons (CP’s) including Immediate Relatives (IR’s) and Material Financial Relationships (MFR’s).
• COs can track insiders’ trading activities from a single dashboard until the UPSI is made public.
• It alerts all DPs of trading window closure and ensures reconciliation between trade intimations given by DPs with BenPos provided by the RTA.

Final Thoughts

More than 30 months have passed since SEBI made SDDs mandatory. SEBI has significant power to take penal actions against non-compliers and trading offenders. Listed companies must prioritize senior stakeholder and company compliance, and ensure that all employees adhere to the company’s Code of Conduct. At Axar, we strive to work with ethically-driven organizations and offer complete digital solutions to streamline board management and governance through our compliance management software in India. 

Connect with Axar to know how InsiderLens can be your company’s greatest compliance asset.