SEBI eases insider trading norms, adds flexibility to trading plans

Securities and Exchange Board of India (SEBI) has amended its insider trading norms, allowing more flexibility for executing trading plans. The new norms will become applicable after three months.

According to the PIT Regulations, an insider may trade in the company’s securities if the compliance officer approves their trading plan. This ensures the insider devises their trading plan before possessing unpublished price-sensitive information.

Regulation 5(2) provides for a cool-off period of six months on trading plans from the time of its public disclosure. This time period has been reduced to 120 days.

The regulator has provided for a 20 per cent price range for buying or selling shares.

“Previously, the insider had to specify the investment value or the number of securities to be purchased. The regulations now require that, in addition to specifying the value or number of securities, the insider must set a price limit for trades within a 20 per cent range,” said Sumit Kochar, Managing Partner, Dolce Vita Legal Advisors.

According to the PIT Regulations, the listed entity’s code of conduct must outline a period of not less than six months, during which a designated person permitted to trade is prohibited from executing a contra trade, which involves executing opposite trades such as buying and selling within a single day.

“Previously, a contra trade was permissible if conducted in accordance with the Trading Plan. However, this six-month restriction now applies regardless of the existence of an approved trading plan,” said Kochar.