Securities And Exchange Board Of India - Subsection
Section 4(1) in Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 2015
(1)No insider shall trade in securities that are listed or proposed to be listed on a stock exchange when in possession of unpublished price sensitive information:[Explanation. - When a person who has traded in securities has been in possession of unpublished price sensitive information, his trades would be presumed to have been motivated by the knowledge and awareness of such information in his possession;] [Inserted by Notification No. SEBI/LAD-NRO/GN/2018/59, dated 31.12.2018 (w.e.f. 15.1.2015).]Provided that the insider may prove his innocence by demonstrating the circumstances including the following : -(i)the transaction is an off-market inter-se transfer between [insiders] [Substituted 'promoters' by Notification No. SEBI/LAD-NRO/GN/2018/59, dated 31.12.2018 (w.e.f. 15.1.2015).] who were in possession of the same unpublished price sensitive information without being in breach of regulation 3 and both parties had made a conscious and informed trade decision;[Provided that such unpublished price sensitive information was not obtained under sub-regulation (3) of regulation 3 of these regulations.] [Inserted by Notification No. SEBI/LAD-NRO/GN/2018/59, dated 31.12.2018 (w.e.f. 15.1.2015).][Provided further that such off-market trades shall be reported by the insiders to the company within two working days. Every company shall notify the particulars of such trades to the stock exchange on which the securities are listed within two trading days from receipt of the disclosure or from becoming aware of such information.] [Inserted by Notification No. SEBI/LAD-NRO/GN/2018/59, dated 31.12.2018 (w.e.f. 15.1.2015).](ii)[ the transaction was carried out through the block deal window mechanism between persons who were in possession of the unpublished price sensitive information without being in breach of regulation 3 and both parties had made a conscious and informed trade decision; [Inserted by Notification No. SEBI/LAD-NRO/GN/2018/59, dated 31.12.2018 (w.e.f. 15.1.2015).]Provided that such unpublished price sensitive information was not obtained by either person under sub-regulation (3) of regulation 3 of these regulations.(iii)the transaction in question was carried out pursuant to a statutory or regulatory obligation to carry out a bona fide transaction.(iv)the transaction in question was undertaken pursuant to the exercise of stock options in respect of which the exercise price was pre-determined in compliance with applicable regulations.](v)[] [Renumbered 'clause (ii)' by Notification No. SEBI/LAD-NRO/GN/2018/59, dated 31.12.2018 (w.e.f. 15.1.2015).] in the case of non-individual insiders: -(a)the individuals who were in possession of such unpublished price sensitive information were different from the individuals taking trading decisions and such decision-making individuals were not in possession of such unpublished price sensitive information when they took the decision to trade; and(b)appropriate and adequate arrangements were in place to ensure that these regulations are not violated and no unpublished price sensitive information was communicated by the individuals possessing the information to the individuals taking trading decisions and there is no evidence of such arrangements having been breached;(vi)[] [Renumbered 'clause (iii)' by Notification No. SEBI/LAD-NRO/GN/2018/59, dated 31.12.2018 (w.e.f. 15.1.2015).] the trades were pursuant to a trading plan set up in accordance with regulation 5.Note: - When a person who has traded in securities has been in possession of unpublished price sensitive information, his trades would be presumed to have been motivated by the knowledge and awareness of such information in his possession. The reasons for which he trades or the purposes to which he applies the proceeds of the transactions are not intended to be relevant for determining whether a person has violated the regulation. He traded when in possession of unpublished price sensitive information is what would need to be demonstrated at the outset to bring a charge. Once this is established, it would be open to the insider to prove his innocence by demonstrating the circumstances mentioned in the proviso, failing which he would have violated the prohibition.
