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Sebi issues framework to curb inadvertent trades by cos’ designated persons during trading window closure

The framework will be effective from the quarter ending September 30, the Securities and Exchange Board of India (Sebi) said in a circular.

Under the new framework, the designated depository will provide access to a listed company on a portal for specifying the trading window closure period.

Sebi on Friday asked stock exchanges and depositories to develop a system wherein permanent account numbers of a company’s designated persons are frozen for a specific period to curb inadvertent trades during the trading window closure. Initially, the new framework will be applicable to declaration of financial results of listed companies that are or were part of benchmark indices — Nifty 50 and Sensex — for the quarter ending September 30, 2022.

Further, the restriction on trading will be for on-market transactions, off-market transfers and creation of pledge in equity shares and equity derivatives contracts (Futures and Options) of such listed companies. The framework will be effective from the quarter ending September 30, the Securities and Exchange Board of India (Sebi) said in a circular. The regulator said the compliance officer and Designated Persons (DPs) of listed companies will continue to independently comply with the obligations under insider trading rules, as applicable to them, till further communication.

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Under the new framework, the designated depository will provide access to a listed company on a portal for specifying the trading window closure period. The portal will auto-populate details of DPs like PAN (Permanent Account Number) and name. The listed company will have to update PAN of DPs to be frozen and “start and end date” of trading window closure period. Further, the company will have to select or de-select PANs of DPs at least two trading days prior to start of the trading window closure period.

Subsequently, the designated depository will have to provide relevant data to stock exchanges and other depositories by next trading day — T-1 day — and on daily basis for any updation in DPs during trading window closure period. From T day, depositories and stock exchanges will have to restrict trading of the DP concerned till the end of the trading window closure period. Any addition or exemption to a DP during the trading window closure period will be effected within two trading days of intimation by company. 

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