Master Circular on Surveillance of Securities Market - SEBI - SEBI/HO/ISD/ISD-PoD-2/P/CIR/2023/039

MASTER CIRCULAR SEBI/HO/ISD/ISD-PoD-2/P/CIR/2023/039 March 23, 2023 To 1. All Recognized Stock Exchanges 2. All Depositories 3. All Listed Companies 4. All Market Intermediaries (MIs) registered with SEBI under Section 12 of the SEBI Act, 1992 5. Fiduciaries as per Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 2015 Dear Sir/Madam, Sub: Master Circular on Surveillance of Securities Market 1. Securities and Exchange Board of India (SEBI) has been issuing various circulars from time to time pertaining to effective surveillance of the securities market. Further, a Master Circular in the form of a compilation of all the relevant circulars was issued on this subject on September 13, 2022. In order to ensure availability of consolidated information contained in all the circulars pertaining to surveillance of securities market at one place, the provisions of the relevant circulars have been consolidated in this Master Circular. 2. This Master Circular is categorized subject wise under various headings, viz., trading rules and shareholding in dematerialized mode, monitoring of unauthenticated news circulated by SEBI registered market intermediaries through various modes of communication and disclosure reporting under the Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 2015. This Master Circular shall come into force from the date of its issue. This Master Circular covers various circulars issued by the Integrated Surveillance Department (ISD) of SEBI and operational as on the date of issuance of this Master Circular. This Master Circular rescinds the circulars listed in Annexure 7. 3. Notwithstanding such rescission, a. anything done or any action taken or purported to have been done or taken under the rescinded circulars including but not limited to any inspection, or enquiry or investigation or adjudication commenced, or show-cause notice issued under the rescinded circulars, prior to such rescission, shall be deemed to have been done or taken under the corresponding provisions of this Master Circular; b. the previous operation of the rescinded circulars or anything duly done or suffered thereunder, any right, privilege, obligation or liability acquired, accrued or incurred under the rescinded circulars, any penalty, incurred in respect of any violation committed against the rescinded circulars, or any investigation, legal proceeding or remedy in respect of any such right, privilege, obligation, liability, penalty as aforesaid, shall remain unaffected as if the rescinded circulars have never been rescinded; 4. This Master Circular is issued in exercise of powers conferred under Section 11 (1) of the Securities and Exchange Board of India Act, 1992 to protect the interest of investors in securities and to promote the development of, and to regulate the securities market. 5. This Master Circular is available on the SEBI website at https://www.sebi.gov.in/ under the category Legal Master Circulars . Yours faithfully, Nitin Singh Deputy General Manager Phone: +91-22-26449254 E-mail: [email protected] 1. Trading Rules and shareholding in dematerialized mode 1.1. Securities of companies shall be traded in the normal segment of the stock exchange if and only if, the company has achieved 100% of promoter s and promoter group s shareholding in dematerialized form. All non-compliant companies which are in Trade for Trade (TFT) segment or under suspension shall remain under Trade for Trade till the time the promoters of the respective companies fully comply. For the above purpose, the stock exchanges shall take the latest shareholding pattern as required to be submitted by the listed companies with stock exchanges in pursuance to the Listing agreement as of the preceding quarter or of any subsequent date. 1.2. In the following cases (except for the original scrips, on which derivatives products are available or included in indices on which derivatives products are available) the trading shall take place in TFT segment for first 10 trading days with applicable price band while keeping the price band open on the first day of trading 1.2.1. Merger, demerger, amalgamation, capital reduction/consolidation, scheme of arrangement, in terms of the Companies Act and/or as sanctioned by the Courts, in cases of rehabilitation packages approved by the National Company Law Tribunal (NCLT) under the provisions of Companies Act, 2013 and Insolvency and Bankruptcy Code, 2016 and in cases of Corporate Debt Restructuring (CDR) packages by the CDR Cell of the RBI. 1.2.2. Securities that are being admitted to trading from another stock exchange by way of direct listing/MOU/securities admitted for trading under permitted category. 1.2.3. Where suspension of trading is being revoked after more than one year. 1.3. Further, in all cases, the stock exchange(s) shall ensure that before starting trading in scrips, the companies have complied with the disclosure requirements and the same is publicly disseminated on the website of the stock exchange(s) to enable investors to take informed decision. 2. Monitoring of unauthenticated news circulated by SEBI Registered Market Intermediaries through various modes of communication 2.1. It has been observed by SEBI that unauthenticated news related to various scrips are circulated through social media platforms/ instant messaging services/ VoIP/ blogs/chat forums/e-mail or any such medium by employees of Broking Houses/other intermediaries without adequate caution as mandated in the Code of Conduct for Stock Brokers and respective regulations of various intermediaries registered with SEBI. 2.2. It was also observed that the Intermediaries do not have proper internal controls and do not ensure that proper checks and balances are in place to govern the conduct of their employees. Due to lack of proper internal controls and poor training, employees of such intermediaries are sometimes not aware of the damage which can be caused by circulation of unauthenticated news or rumours. It is a well-established fact that market rumours can do considerable damage to the normal functioning and behaviour of the market and distort the price discovery mechanisms. 2.3. In view of the above facts, SEBI Registered Market Intermediaries are directed that: 2.3.1. Proper internal code of conduct and controls should be put in place. 2.3.2. Employees/temporary staff/voluntary workers etc. employed/working in the offices of market intermediaries do not encourage or circulate rumours or unverified information obtained from client, industry, any trade or any other sources without verification. 2.3.3. Access to social media platforms/ instant messaging services/ VoIP / Blogs/Chat forums/ websites/e-mail or any such medium should either be subject to controlled supervision or access should not be allowed. 2.3.4. Logs for any usage of such social media platforms/ instant messaging services/ VoIP / Blogs/Chat forums/websites/e-mail or any such medium shall be treated as records and the same should be maintained as specified by the respective regulations which govern the concerned intermediary. 2.3.5. Employees should be directed that any market related news received by them either in their official mail/personal mail/blog or in any other manner, should be forwarded only after the same has been seen and approved by the Compliance Officer of the concerned Intermediaries. If an employee fails to do so, he/she shall be deemed to have violated the various provisions contained in SEBI Act and the Rules / Regulations framed thereunder, and shall be liable for action. The Compliance Officer shall also be held liable for breach of duty in this regard. 3. Disclosure reporting under the SEBI (Prohibition of Insider Trading) Regulations, 2015 3.1. Disclosures under SEBI (Prohibition of Insider Trading) Regulations, 2015 ( PIT Regulations ) Regulation 6 3.1.1. With reference to the requirements of Regulation 6 of PIT Regulations, the disclosures may be maintained by the company in physical/electronic mode as per the prescribed format ( Annexure 1 ) Regulation 8 9 3.1.2. With reference to the requirements of the Regulation 8 (Code of Fair Disclosure) and Regulation 9 (Code of Conduct) of the Regulations, the companies shall also ensure that: 3.1.2.1. Code of practices and procedures for fair disclosure of Unpublished Price Sensitive Information (UPSI), formulated and published (on its official website), is confirmed to the stock exchanges, immediately. 3.1.2.2. A company deals with only such market intermediary / every other person, who is required to handle UPSI, who have formulated a code of conduct as per the requirements of PIT Regulations. 3.2. Reporting to Stock Exchanges regarding violations under SEBI (Prohibition of Insider Trading) Regulations, 2015 relating to the Code of Conduct (CoC) 3.2.1. In terms of clause 13 of Schedule B (in case of listed companies) and clause 11 of Schedule C (in case of intermediaries and fiduciaries) read with Regulation 9 of PIT Regulations, the listed companies, intermediaries and fiduciaries shall promptly inform the stock exchange(s) where the concerned securities are traded, regarding violations relating to CoC under PIT Regulations in such form and manner as may be specified by the Board from time to time. 3.2.2. The standard format as specified by SEBI for reporting of violations related to CoC is placed at Annexure 2. The listed companies, intermediaries and fiduciaries shall inform the violations of PIT Regulations relating to CoC as per the format to the stock exchange(s). 3.2.3. Further, in terms of clause 12 of Schedule B and clause 10 of Schedule C read with Regulation 9 of the PIT Regulations, any amount collected by the listed companies, intermediaries and fiduciaries under these clauses for violation(s) of CoC shall be remitted to the Board for credit to the Investor Protection and Education Fund (IPEF) administered by the Board under the Securities and Exchange Board of India Act, 1992. 3.2.4. As per Regulation 4(2) of SEBI (Investor Protection and Education Fund) Regulations, 2009, such amounts shall be credited to the IPEF through NEFT/RTGS/IMPS or online payment using the SEBI Payment Gateway or any other mode as may be specified by the Board from time to time. The bank account details of SEBI IPEF for online transfer is given below: Name of Beneficiary SEBI IPEF Bank Name Bank of India Bank Branch Bandra Kurla Complex (BKC) Account Number 012210210000008 IFSC Code BKID0000122 3.3. Automation of Continual Disclosures under Regulation 7(2) of PIT Regulations - System Driven Disclosures 3.3.1. SEBI, vide circular no. CIR/CFD/DCR/17/2015 dated December 01, 2015, CFD/DCR/CIR/2016/139 dated December 21, 2016 and SEBI/HO/CFD/ DCR1/CIR/ P/2018/85 dated May 28, 2018, implemented the system driven disclosures in phases, under SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 and PIT Regulations. 3.3.2. The system driven disclosures will be implemented for member(s) of promoter group and designated person(s) in addition to the promoter(s) and director(s) of company (hereinafter collectively referred to as Entities ) under Regulation 7(2) of PIT Regulations. 3.3.3. The system driven disclosures shall pertain to trading in equity shares, equity derivative instruments i.e. Futures and Options of the listed company (wherever applicable) and listed debt securities of equity listed companies by the Entities. 3.3.4. The procedure for implementation of the system driven disclosures is provided at Annexure 3 . 3.3.5. The depositories and stock exchange(s) shall make necessary arrangements such that the disclosures pertaining to PIT Regulations are disseminated on the websites of respective stock exchange(s). 3.3.6. As currently done, the disclosures generated through the system shall be displayed separately from the regular disclosures filed with the stock exchange(s). 3.3.7. The listed companies who have complied with the aforesaid requirements under various provisions of 3.3, the manual filing of disclosures as required under Regulation 7(2) (a) (b) of PIT Regulations is no longer mandatory. 3.4. Trading Window closure 3.4.1 Allowing Offer for Sale (OFS) and Rights Entitlements (RE) transactions during trading window closure period 3.4.1.1. Clause 4 (3) (b) of Schedule B read with Regulation 9 of PIT Regulations, inter-alia, states that trading window restrictions shall not apply in respect of transactions mentioned therein or transactions undertaken through such other mechanism as may be specified by the Board from time to time. 3.4.1.2. In addition to the transactions mentioned in Clause 4 (3) (b) of Schedule B read with Regulation 9 of PIT Regulations, trading window restrictions shall not apply in respect of OFS and RE transactions carried out in accordance with the framework specified by the Board from time to time. 3.4.2. Trading Window closure period under Clause 4 of Schedule B read with Regulation 9 of PIT Regulations - Framework for restricting trading by Designated Persons ( DPs ) by freezing Permanent Account Number (PAN) at security level 3.4.2.1. Clause 4 (1) of Schedule B read with Regulation 9 of PIT Regulations, inter-alia, states that Designated persons may execute trades subject to compliance with these regulations. Towards this end, a notional trading window shall be used as an instrument of monitoring the trading by the designated persons. The trading window shall be closed when the compliance officer determines that a designated person or class of designated persons can reasonably be expected to have possession of UPSI. Such closure shall be 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 . 3.4.2.2. One of the instances of closure of trading window is provided in Clause 4 (2) of Schedule B read with Regulation 9 of PIT Regulations, which inter-alia states that trading restriction period shall be made applicable from the end of every quarter till 48 hours after the declaration of financial results ... 3.4.2.3. In order to rationalize the compliance requirement under Clause 4 of Schedule B read with Regulation 9 of PIT Regulations, improve ease of doing business and prevent inadvertent non-compliances of provisions of PIT Regulations by DPs, stock exchanges and depositories shall develop a system to restrict trading by DPs of listed company during trading window closure period. 3.4.2.4. To begin with, this requirement shall be applicable to declaration of financial results of the listed company that is or was part of benchmark indices i.e. NIFTY 50 and SENSEX from the quarter ending September 30, 2022. Further, the restriction on trading shall be for on-market transactions, off-market transfers and creation of pledge in equity shares and equity derivatives contracts (i.e. Futures and Options) of such listed companies. The procedure for implementation of the system is enclosed at Annexure 4. The flow chart of the same is enclosed at Annexure 5 . 3.4.2.5. The Compliance Officer and DPs of listed companies shall continue to independently comply with the obligations under PIT Regulations, as applicable to them, till further communication. 3.4.2.6. The depositories shall submit the quarterly report to SEBI in the format placed at Annexure 6 .