Securities and Exchange Board of India (Insider Trading) Regulations, 1992 - LE/6308/92 - SEBI

SECURITIES AND EXCHANGE BOARD OF INDIA NOTIFICATION Bombay the, 9 th November, 1992 No. LE/6308/92.- In exercise of the powers conferred by section 30 of the Securities and Exchange Board of India Act, 1992 (15 of 1992), the Board with the previous approval of the Central Government, hereby makes the following regulations, namely :- CHAPTER I PRELIMINARY 1. Short title and commencement.-( 1) These regulations may be called the Securities and Exchange Board of India (Insider Trading) Regulations, 1992. (2) These regulations shall come into force on the date of their publication in the Official Gazette. 2. Definitions.- In these regulations, unless the context otherwise requires :- (a) Act means the Securities and Exchange Board of India Act, 1992 (15 of 1992); (b) body corporate means a body corporate as defined in section 2 of the Companies Act, 1956 (1 of 1956); (c) connected person means any person who- (i) is a director, as defined, in clause (13) of section 2 of the Companies Act, 1956 (1 of 1956) of a company, or is deemed to be a director of that company by virtue of sub-clause (10) of section 307 of that Act or (ii) occupies the position as an officer or an employee of the company or holds a position involving a professional or business relationship between himself and the company and who may reasonably be expected to have an access to un-published price sensitive information in relation to that company : (d) dealing in securities means an act of buying, selling or agreeing to buy sell or deal m any securities by any person either as principal or agent; (c) insider means any person who, is or was connected with the company or is deemed to have been connected with the company and is reasonably expected to have access, by virtue of such connection, to unpublished price sensitive information in respect of securities of the company, or who has received or has had access to such unpublished price sensitive information; (f) investigating authority means any officer of the Board or any other person, not being a firm, body corporate or an association of persons, having experience in dealing with the problems relating to the securities market and who is authorised by the Board under Chapter III; (g) officer of a company means any person as defined in clause (30) of section 2 of the Companies Act, 1956 (1 of 1956) including an auditor of the company; (h) person is deemed to be a connected person , if such person- (i) is a company under the same management or group, or any subsidiary company thereof within the meaning of sub-section (1B) of section 370, or sub-section (11) of section 372, of the Companies Act, 1956 (1 of 1956) or sub-clause (g) of section 2 of the Monopolies- and Restrictive Trade Practices Act, 1969 (54 of 1969) as the case may be; or (ii) is an official or a member of a stock exchange or of a clearing house of that stock exchange, of a dealer in securities within the meaning of clause (c) of section 2, and section 17 of the Securities Contracts (Regulation) Act, 1956 (42 of 1956) respectively, or any employee of such member or dealer of a stock-exchange; (iii) is a merchant banker, share transfer agent, registrar to an issue, debenture trustee, broker, portfolio manager, Investment Advisor, sub-broker, Investment Company or an employee thereof, or is member of the Board of Trustees of a mutual fund or a member of the Board of Directors of the Asset Management Company of a mutual fund or is an employee thereof. Who have a fiduciary relationship with the company ; (iv) is a Member of the Board of Director or an employee of a public financial institution as defined in section 4A of the Companies Act. 1956; or (v) is an official or an employee of a self Regulatory organisation recognised or authorised by the Board of a regulatory body; or (vi) Is a relative of any of the aforementioned persons; (vii) is a banker of the company. (i) relative means a person, as defined in section 6 of the Companies Act, 1956 (1 of 1956), (j) stock exchange means a stock exchange which is recognised by the Central Government under section 4 of Securities Contracts (Regulation) Act, 1956 (2 of 1956); (k) unpublished price sensitive information means any information which relates to the following matters or is of concern, directly or indirectly, to a company, and is not generally known or published by such company for general information, but which if published or known, is likely to materially affect the price of securities of that company in the market- (i) financial results (both half-yearly und annual) of the company; (ii) intended declaration of dividends' (both interim and final); (iii) issue of shares by way of public rights, bonus, etc.; (iv) any major expansion plans or execution of new projects; (v) amalgamation, mergers and takeovers; (vi) disposal of the whole or substantially the whole of the undertaking; (vii) such other information as may affect the earnings of the company. (viii) any changes in policies, plans of operations of the Company. CHAPTER II PROHIBITION ON DEALING, COMMUNICATING OR COUNSELLING 3. Prohibition on dealing, communication of counselling on matters relating to insider trading.- No insider shall - (i) either on his own behalf or on behalf of any other person, deal in securities of a company listed on any stock exchange on the basis of any unpublished price sensitive information; or (ii) Communicate any unpublished price sensitive information to any person, with or without his request for such information, except as required in the ordinary course of business or under any law; or (iii) counsel or procure any other person to deal in securities of any company on the basis of unpublished price sensitive information. 4. Violation of provisions relating to insider, trading.- Any insider who deals in securities or communicates any information or counsels any person dealing in securities in contravention of the provisions of regulation 3 shall be guilty of Insider trading, CHAPTER III INVESTIGATION 5. Board's right to investigate.-( 1) Where the Board, on the basis of written information in its possession, is of the opinion that it is necessary to investigate and inspect the books of account, other records and documents of an insider for any of the purposes specified in sub-regulation (2), it may appoint an investigating authority for the said purpose; (2) The purposes referred to in sub-regulation (1) may be as follows : (a) to investigate into the complaints received from investors, intermediaries or any other person on any matter having a bearing on the allegations of insider trading; and (b) to investigate suo-moto upon its own knowledge or information in its possession to protect the interest of investors in securities against breach of these regulations 6. Procedure for investigation.-( 1) Before undertaking any investigation under regulation 5 the Board shall give a reasonable notice to insider for that purpose. (2) Notwithstanding anything contained in sub-regulation (1), where the Board is satisfied that in the interest of investors or in public interest no such notice should be given, it may be an order in writing direct that the investigation be taken up without such notice. (3) On being empowered by the Board, the investigation authority shall undertake the investigation and inspection of books of account and the insider against whom an investigation is being carried out shall be bound to discharge his obligation as provided in regulation 7. 7. Obligation of insider on investigation by the Board.-( 1) It shall be the duty of every insider, who is being investigated, to produce to the investigating authority such books, accounts and other documents in his custody of control and furnish the authority with the statements and information relating to the transactions in securities market within such time as the said authority may require. (2) The insider shall allow the investigating authority to have reasonable access to the premises occupied by such insider and also extend reasonable facility for examining any books, records, documents and computer data in the possession of the stock-broker or any other person and also provide copies of documents or other materials which in the opinion of the investigating authority are relevant. (3) The investigating authority, in the course of investigation, shall be entitled to examine or record statements of any member, director, partner, proprietor and employee of the insider. (4) It shall be the duty of every director, proprietor, partner, officer and employee of the insider to give to the investigating authority all assistance in connection with the investigation, which the insider may be reasonably expected to give. 8. Submission of Report to the Board.- The investigating authority shall, within one month of the conclusion of the investigation submit an investigation report to the Board. 9. Communication of Findings etc.-( 1) The Board shall after consideration of the investigation report communicate the findings to the insider and he shall be given an opportunity of being heard before any action is taken by the Board on the findings of the investigating authority. (2) On receipt of the explanation, if any, from the insider, the Board may call upon the insider to take such measures as the Board may deem fit to protect thy interest of investors and in the interest of the securities market and for due compliance with the provisions of the Act, rules made thereunder and these regulations. 10. Appointment of Auditor.- Notwithstanding anything contained in regulation 5, the Board may appoint a qualified auditor to investigate into the books of account or the affairs of the insider; Provided that, the auditor so appointed shall have the same powers of the inspecting authority as stated in regulation 5 and the insider shall have the obligations specified in regulation 7, 11. Directions by the Board.- On receipt of the explanation, if any, from the insider under sub-regulation (2) of regulation 9, the Board may with out prejudice to its right to initiate criminal prosecution, under section 24 of the Act, give such directions to protect the interest of investors and in the interest of the securities market and for due compliance with the provisions of the Act, rules made there-under and these regulations, as it deems fit for all or any of the following purposes, namely . (a) directing the insider not to deal in securities in any particular manner; (b) prohibiting the insider from disposing of any of the securities acquired in violation of these regulations; (c) restraining the insider to communicate or counsel any person to deal in securities. 12. Appeal to the Central Government.- Any person aggrieved by an order of the Board under these regulations may prefer an appeal to the Central Government G. V. RAMAKRISHNA, Chairman, Securities Exchange Board of India.