PAN-trading account freeze extended to all listed firms, says Sebi

The Securities and Exchange Board of India (Sebi) has extended the practice of freezing trading accounts of top company executives during “trading window closures” to all listed companies in a phased manner.

The trading window closure is a restriction period typically applicable from the end of every quarter until 48 hours after the declaration of financial results. During this period, key executives are not allowed to deal in shares of their companies to prevent the potential misuse of sensitive information.

The permanent account numbers (PANs) of key executives, identified as 'designated persons' (those who can have access to unpublished price-sensitive information), are also frozen during this period. The framework, however, is currently applicable to the companies that are part of the Sensex and the Nifty50 index.

Sebi has introduced a glide path extending this framework to all listed companies under the Prohibition of Insider Trading (PIT) Regulations. The new rules will be applicable to the top 1,000 companies in terms of market capitalisation from October 1. The next 1,000 firms will be included from January 1, 2024, and the remaining from April 1, 2024.

Experts said the extension of the framework to all the listed companies would not only facilitate the ease of business but also prevent inadvertent trading by designated persons during the restriction period.

The market regulator has directed listed companies to confirm the designated depository details of listed ISIN of equity share of the company, name, PAN,  and the demat account number of the designated persons on whom the freeze will be applicable.

Listed companies will be provided with a portal for updating the commencement and end of the trading window closure period.

According to Sebi’s annual report for 2021-22, nearly 29 per cent of the cases taken up for investigation by the markets regulator were related to insider trading. Further, Sebi completed adjudication proceedings against 20 entities for engaging in insider trading and levied penalties worth Rs 2.88 crore  for such violations.

The Fine Print

• Trading window closure is a restriction period applicable typically from the end of every qtr until 48 hrs after the declaration of results
• The framework will be applicable to the top 1,000 firms from Oct 1
• Extension to all listed companies will prevent inadvertent trading by designated persons during the restriction period