The Securities and Exchange Board of India (“SEBI”) has issued an informal guidance on November 25, 2019 to Arvind Limited (“Company”), under the SEBI (Informal Guidance) Scheme, 2003, in connection with the SEBI (Prohibition of Insider Trading) Regulations, 2015 (“PIT Regulations”).
Following is a summary of the informal guidance issued by SEBI.
Facts:
The equity shares of the Company are listed on the NSE and BSE. One of the promoters (“P”), who is also a director of the Company, holds shares in the Company under his PAN in the following capacities:
Clause 10 of Schedule B of the PIT Regulations restricts contra trade by a ‘designated person’. The Company contended that since P is holding shares in different capacities, shares held under each capacity should be considered as shares held by separate ‘designated persons’ and the restriction of contra trade should not be applicable to P, holding shares in different capacities.
Issue:
The Company sought informal guidance on the following issues:
SEBI’s guidance:
SEBI referred to regulation 9(4) of the PIT Regulations which, inter alia, specifies the persons to be identified as ‘designated person’. Such designated person is determined on the basis of the role and function in the organisation and the access that such role and function would provide such person to unpublished price sensitive information (“UPSI”). The term, ‘designated person’ is wide enough to include any person having such role and function in the organisation which would provide access to UPSI to such person in the opinion of the board of directors.
Thus, with respect to query 1 and 2, SEBI stated that if P is specified as a ‘designated person’ by the board of directors of the Company, the restriction to engage in contra trade as provided under the provisions of the PIT Regulations would be applicable to all the shares held under the PAN of P irrespective of the capacities in which P holds such shares in the Company.
With respect to query 3, SEBI stated that if a trustee holds the shares under its own PAN, restrictions of contra trade will be applicable if such trustee is a ‘designated person’ in terms of the PIT Regulations.
This update has been contributed by Aastha (Partner) and Kartik Jigyasi (Associate).
Download Pdf
7A, 7th Floor, Tower C, Max House,
Okhla Industrial Area, Phase 3,
New Delhi – 110020
The rules of the Bar Council of India do not permit advocates to solicit work or advertise in any manner. This website has been created only for informational purposes and is not intended to constitute solicitation, invitation, advertisement or inducement of any sort whatsoever from us or any of our members to solicit any work in any manner. By clicking on 'Agree' below, you acknowledge and confirm the following:
a) there has been no solicitation, invitation, advertisement or inducement of any sort whatsoever from us or any of our members to solicit any work through this website;
b) you are desirous of obtaining further information about us on your own accord and for your use;
c) no information or material provided on this website is to be construed as a legal opinion and use of this website will not create any lawyer-client relationship;
d) while reasonable care has been taken in ensuring the accuracy of the contents of the website, Argus Partners shall not be responsible for the results of any actions taken on the basis of information provided in this website or for any error or omission in the website; and
e) in cases where the user has any legal issues, the user must seek independent legal advice.