Sebi mulls to extend automated closure of trading window ahead of results

Markets regulator Sebi on Friday proposed to extend the automated closure of trading window ahead of the declaration of financial results to the immediate relatives of designated persons of listed companies.

The move, if implemented, would prevent inadvertent non-compliance of insider trading rules, according to a consultation paper floated by Sebi. 

The markets regulator, in August 2022, issued a framework restricting trading by depository participants by way of freezing the PAN at security level during the trading window closure period.

The freezing of the PAN at the security level is being carried out by the stock exchanges and depositories based on the information provided by the listed company.

Initially, this PAN freeze framework was made applicable for trading window closure on account of declaration of financial results of listed companies that were part of benchmark indices such as Nifty 50 and Sensex.

Subsequently, Sebi in July 2023, extended the framework to restrict trading by designated persons during the trading window closure period, to all listed companies, in a phased manner.

In the first phase, the framework was made applicable to designated persons of all listed companies. This has reduced the compliance requirements of listed entities and eliminated inadvertent trading during trading window closure.

"Considering the effective implementation of the framework, it is proposed to extend the aforesaid framework to immediate relatives of designated persons," Sebi said in its consultation paper.

The Securities and Exchange Board of India (Sebi) has sought public comments on the proposals till February 28.

Immediate relative means a spouse of a person, and includes the parent, sibling, and child of such person or of the spouse, any of whom is either dependent financially on such person, or consults such person in taking decisions relating to trading in securities.

Under the insider trading rules, designated persons can execute trades subject to compliance with these regulations. Towards this end, a notional trading window is used as an instrument for monitoring the trading by the designated persons.

The trading window gets closed when the compliance officer determines that a designated person or class of designated persons can reasonably be expected to have possession of unpublished price-sensitive information (UPSI). Such closure is generally imposed in relation to such securities to which such UPSI relates.

"Designated persons and their immediate relatives shall not trade in securities when the trading window is closed," Sebi said, adding that the trading restriction period will be made applicable from the end of every quarter till 48 hours after the declaration of financial results.