SEBI Eases ‘Trading Plans’ Framework for Company Insiders

The Securities and Exchange Board of India (SEBI) has recently made significant revisions to its ‘Trading Plans’ framework, mainly focused at facilitating compliant trading practices among insiders who regularly handle unpublished price-sensitive information (UPSI).

Reduction in Cool-Off Period

SEBI’s latest circular reduces the minimum cool-off period required between the disclosure and implementation of a trading plan from six months to four months. This adjustment allows insiders, including senior management and key managerial personnel (KMP), to execute their trading plans sooner after public disclosure.

Flexibility in Price Limits

Under the revised framework, insiders can now set price limits up to 20% above or below the closing price on the date the trading plan is submitted. If the security’s price moves beyond these limits, the trade will automatically be restricted.

Compliance Requirements

Once a trading plan receives approval, the compliance officer is required to notify the stock exchanges within two trading days. This ensures transparency and timely disclosure of trading activities. Moreover, the officer is required to disclose the specified price limits, enhancing accountability in trading practices.

Audit Committee Oversight

In instances where a trading plan faces partial or full non-implementation due to liquidity issues, insiders are required to inform the compliance officer within two trading days after the plan expires. The compliance officer then will present this information to the Audit Committee, which will evaluate the justification for non-implementation.

Regulatory Amendments

SEBI has made amendments to the insider trading rules that are scheduled to take effect 90 days from their publication in the official circular. These changes are designed to simplify the trading process for insiders while maintaining strict adherence to regulatory standards, ensuring market integrity.

Conclusion: In conclusion, SEBI’s revised ‘Trading Plans’ framework will ensure transparency and integrity in the market. By shortening the cool-off period and setting flexible price limits, SEBI aims to facilitate timely and compliant trading activities for company insiders to balance insiders’ legitimate trading needs with regulatory oversight, promoting a fair and transparent market.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.