SEBI Consultation Paper: Extension of Automated Trading Window Closure - MMJC

Securities and Exchange Board of India (‘SEBI’) vide its notification dt: February 7, 2025[1], released a consultation paper for extending automatic trading window closure facility to immediate relatives of designated persons.

Following are key highlights of this consultation paper:

Current Framework: SEBI Master Circular dt September 23, 2024, provides for automatic trading window closure for designated persons. Currently this facility of automatic trading window closure is applicable for unpublished price sensitive information pertaining to financial results.

Proposal: It is now proposed to extend automatic trading window closure facility to immediate relatives of designated persons also.

As per Securities and Exchange Board of India (Prohibition of Insider Trading), Regulations 2015, immediate relatives means spouse of a person and includes parents, siblings, and children of the person or of the spouse any of whom is either financially dependent on such person or consult the designated persons for taking decisions relating to trading in securities. So, it is proposed to extend the facility of automatic trading window closure to these individuals also.

Trading window closure is applicable whenever there is an unpublished price sensitive information with the designated persons. SEBI consultation paper does not clearly specify whether this extension of facility of automatic trading window closure for immediate relatives of designated persons would also pertain to for unpublished price sensitive information pertaining other than financial results.

On perusing the consultation paper dt: February 7, 2025, it is stated that it is proposed to extend the applicability of point 3.4.2 of Master circular on surveillance of securities market dt: September 23, 2024 (i.e. automated implementation of trading window closure) to immediate relatives of designated persons. Hence it seems automated trading window closure facility is also being extended to immediate relatives of designated persons for unpublished price sensitive information pertaining to financial results only.

Conclusion

If this proposal of automatic trading window closure for immediate relatives gets approved, listed companies would then have to keep data relating to immediate relatives of designated persons updated on real time basis for the purposes of automated trading window closure. Further this might also require awareness amongst immediate relatives would be required to be created for implementation of this process.

Designated persons are also required to submit data for persons with whom they have material financial relationship[2]. It needs to be highlighted that SEBI has not considered extending this facility of automatic trading window closure to persons with whom designated persons have material financial relationships.

Last date for comments on this consultation paper is February 28, 2025

[1] https://www.sebi.gov.in/reports-and-statistics/reports/feb-2025/consultation-paper-on-draft-circular-on-extension-of-automated-implementation-of-trading-window-closure-to-immediate-relatives-of-designated-persons_91727.html

[2] a relationship in which one person  is  a  recipient  of  any  kind  of  payment  such  as  by  way  of  a  loan  or  gift from  a designated person during the immediately preceding twelve months, equivalent to at least 25% of the annual income of such designated person but shall exclude relationships in which the payment is based on arm’s length transactions