On August 19, 2020, the Securities and Exchange Board of India (“SEBI”) issued an informal guidance to KP Advisors Private Limited ("KPCA") in respect of the interpretation of the SEBI (Prohibition of Insider Trading) Regulations, 2015 (“PIT Regulations”).
KPCA is in the process of executing a code of conduct to regulate, monitor and report trading by its designated persons pursuant to Regulation 9 (1) and 9 (2) of the PIT Regulations. It is also maintaining a restricted list of clients in accordance with the Schedule C of the PIT Regulations.
The 2 (two) questions raised before SEBI were as follows:
SEBI stated that the minimum standards for code of conduct under Schedule C of the PIT Regulations would apply to KPCA as it is an intermediary within the meaning of Section 12 of the SEBI Act, 1992 and a registered category I merchant banker.
SEBI referred to sub-regulation (1) and clause 4 of Schedule C of the PIT Regulations and stated that trading in all securities by the designated persons shall be subject to pre-clearance by the compliance officer if its value is above a certain threshold. The restricted list should be used as a basis for approving or rejecting applications for pre-clearance of trades. Further, referring to clause 5 of Schedule C of PIT Regulations, SEBI considered the question of maintaining confidentiality about the restricted list and stated that sharing the restricted list with the designated persons would undermine the requirement of maintaining confidentiality of restricted list as stipulated in the PIT Regulations.
Please find a copy of the informal guidance here.
This update has been contributed by Adity Chaudhury (Pattner) and Aditi Gupta (Associate).
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