PIT Regulations

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Permissibility of Pledges: Decoding SEBI’s View

The efficiency of the securities market depends on equal access to information and ensuring information symmetry for all stakeholders. Many Indian listed entities have significant promoter/ promoter group shareholding, which gives them the advantage of asymmetrical access to unpublished information. For free and fair trade in the financial market, a level-playing field between the promoter/ promoter group and retail shareholders is crucial. This is why there is prohibition on communication of Unpublished Price Sensitive Information (“UPSI”) and insider trading.Continue Reading Permissibility of Pledges: Decoding SEBI’s View

FIG Paper - Navigating SEBI’s Definition of UPSI

Introduction:

The objective of the PIT Regulations is to prohibit insiders with access to Unpublished Price Sensitive Information (“UPSI”) from making illicit gains and to ensure timely, adequate and even disclosure of UPSI to the public. Hence, the determination of what constitutes as UPSI becomes necessary. In this regard, the Securities and Exchange Board of India (“SEBI”) has signalled a shift from a principle-based regime to a more prescriptive regime, which is likely to result in increased compliance obligations for the listed companies.Continue Reading FIG Paper (No. 26 – Series. 3): Navigating SEBI’s Definition of UPSI

True and Fair

Context

“Forewarned is forearmed” is the cardinal principle underlying company law jurisprudence around the world and the foundation of all disclosure requirements.

Section 129(1) of the Companies Act, 2013 (“Act”), provides that the financial statements (“FS”) shall give a ‘true and fair view’ of the state of affairs of the company, comply with the accounting standards notified under Section 133 of the Act, and also be in the form provided for different classes of companies in Schedule III of the Act.Continue Reading How True is ‘True and Fair’ View?

Insider Trading Regime

Introduction

Across jurisdictions, the mischief of insider trading is sought to be curbed and punished by the market regulators since any securities market of repute would measure its success, among other variables, based on the integrity and fairness of transactions conducted on its platform. As such, the prohibition of insider trading stems from the moral imperative, which demands that there is no information asymmetry between insiders and other shareholders while dealing in listed securities. This effectively translates into restraint being exercised by insiders i.e. the persons who have access to the unpublished price sensitive information in relation to the listed securities in which they deal.Continue Reading Winds of Change – The Recent Judicial and Legislative Developments in Insider Trading Regime

Regulatory overload on Audit Committees

Background

The regulatory architecture under the Companies Act, 2013 (“Act”), and the SEBI (LODR) Regulations, 2015 (“LODR”) places significant emphasis on the functioning of various committees of the Board of Directors (“Board”) of a listed company. While all Board committees have been entrusted with important responsibilities, a disproportionate amount of the regulatory burden has been placed on the Audit Committee. The Audit Committee has multifarious responsibilities under Section 177 and various other provisions of the Act, the LODR, and the SEBI (Prohibition of Insider Trading) Regulations, 2015 (“PIT Regulations”).Continue Reading Gatekeepers of Governance – Audit Committee

The Sound of SEBI’s Silence Will the Factorial Order Change the Rules of the Game

Last month, the Securities Appellate Tribunal (SAT) passed an order in favour of Factorial Master Fund[1] (Factorial). This overturned the order of the SEBI Whole Time Member who had held that Factorial had contravened the provisions of the SEBI (Prohibition of Insider Trading) Regulations, 2015 (PIT Regulations) by trading in the securities of L&T Finance Holdings Limited (LTFH), while in possession of unpublished price sensitive information (UPSI).Continue Reading The Sound of SEBI’s Silence: Will the Factorial Order Change the Rules of the Game?