Securities and Exchange Board of India (“SEBI”) has, through a circular dated 19th July, 2019 standardized the procedure for reporting of violations related to Code of Conduct under SEBI (Prohibition of Insider Trading) Regulations, 2015 (“Regulation”).
Background:
As per the Regulation 9(1)* and 9(2)** of the Regulation, the Board of Directors of every Listed Company and Board of Directors and Heads of every intermediary and fiduciary are mandated to formulate a Code of Conduct (“Code”) for its designated persons and immediate relatives. SEBI further mandated that there should be mechanism for continuous monitoring of the compliances arising out of the Code and to report/inform SEBI in accordance with the provisions of the Regulation, in case of any violations of the same.
Accordingly, SEBI has been receiving information and reports from various listed companies. However, it has been observed that during submission of such reports of violation, most of the listed companies are giving inadequate information regarding such violation which are essential for examining such issues and to ascertain actions of SEBI in this regard.
Now, considering the need of the hour, SEBI has come up with a format (Annexure – A) for reporting all such incidents. It mandatory to provide the following information :
Ø I Name of the listed company/ intermediary/ fiduciary,
Ø Name of Designated Person and immediate relatives of Designated Persons with their PAN details,
Ø Functional role of Designated Persons,
Ø Specify whether the Designated Person is promoter or not,
Ø Details of concerned transaction,
Ø In case the value of trade is more than 10 Lakhs in one calendar year,
- Date of intimation of trade by the Designated person/ Promoter/ director / promoter group to the company,
- Date of intimation of trade by companies to stock exchange.
Ø Details of violations and the details of action taken with reasons and
Ø Details of any previous instances of violation since the previous financial year.
The object of the new format is to establish a standardized procedure in case of reporting of any violation of the Code.
SEBI has further instructed the Listed Entities, Intermediaries and Fiduciaries to –
- Ensure that violations are reported by designated persons and immediate relatives of designated persons in the prescribed format.
- Maintain a database of all such reported incidents arising out of violation of Code.
Please refer to the hyperlink for more details. The standardize format of reporting incidents arising out of violation of the Code in attached as Annexure – A.
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Code of Conduct
*9. (1) The board of directors of every listed company and market intermediary shall formulate a code of conduct to regulate, monitor and report trading by its employees and other connected persons towards achieving compliance with these regulations, adopting the minimum standards set out in Schedule B to these regulations, without diluting the provisions of these regulations in any manner.
*9. (2) Every other person who is required to handle unpublished price sensitive information in the course of business operations shall formulate a code of conduct to regulate, monitor and report trading by employees and other connected persons towards achieving compliance with these regulations, adopting the minimum standards set out in Schedule B to these regulations, without diluting the provisions of these regulations in any manner.
Source : Securities and Exchange Board of India
