NEW DELHI: The blackout period during which top rank corporate executives in possession of unpublished price sensitive information (UPSI) are prohibited from trading in company (they work for) shares would be done away with in future.
This is part of proposals made by the Securities and Exchange Board of India (Sebi) to relax the rules governing trading plans of key managerial persons in possession sof price sensitive information. As per current rules under the Prohibition of Insider Trading (PIT) Regulations, listed firms close the trading window from the end of the financial period on which the results are to be announced until 48 hours after the announcement.
In a consultation paper floated by it, Sebi has proposed the relaxation in trading rules citing that these insiders may need to trade for purposes such as creeping acquisitions, compliance with minimum public shareholding norms, etc. It argues that grant of stock options is often a major component of CXOs salary and they may wish to dispose of the shares acquired via exercising stock options, but by virtue of perpetually holding UPSI, may find it difficult to do so.
As per current rules, top rank corporate leaders have to disclose their trading plans for at least 12 months. And they could trade in company shares only six months after disclosing their trading plans. The Sebi now proposes that one can submit the trading plan for a minimum period of two months from the existing 12 months. It also proposes to reduce the cooling off period to four months from six months.
As per the proposal, the insider should have flexibility, during formulation of the trading plan, to provide price limits -- upper price limits for buy trades and lower price limits for sell trades. Such price limit should be within +/-20% of the closing price on date of submission of trading. If the price of the security, during execution, is outside the price limit set by the insider, the trade should not be executed. If no price limit is opted for, the trade has to be undertaken irrespective of the prevailing price.
On privacy of insiders’ personal detail (name, designation and PAN) with disclosure of trading plan, the working group to look into the issue has suggested that two separate disclosures of trading plans -- full (confidential) disclosure to stock exchange and disclosure without personal details to public via the stock exchange.
