Tracking of trades of designated persons post resignation. - MMJC

Background

Securities and Exchange Board of India (Prohibition of Insider Trading), Regulations 2015 [‘SEBI PIT’] does not specify whether trading of designated persons and their immediate relatives needs to be tracked post their resignation. Securities and Exchange Board of India [‘SEBI’] in their FAQs dt: March 31, 2023[1] has at FAQ no. 48 stated that, “Upon resignation from service of designated person, a company/ intermediary/ fiduciary should maintain the updated address and contact details of such designated person. The company/intermediary/ fiduciary should make efforts to maintain updated address and contact details of such persons for one year after resignation from service. Such data should be preserved by the company/ intermediary/ fiduciary for a period of 5 years”.

If a designated person is in possession of unpublished price sensitive information at the time of resigning (i.e. at the time of getting relieved from listed company) and that unpublished price sensitive information is not yet made public, then whether trades of such designated persons need to be tracked or as specified by SEBI FAQ only updated address and contact details needs to be kept?

Analysis

As per clause 4(1) of Schedule B of SEBI PIT, “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officer determines that a designated person or class of designated persons can reasonably be expected to have access to unpublished price sensitive information.” 

Designated persons[2] as identified by listed company are those persons who have access to unpublished price sensitive information.

So, whenever a designated person is in possession of unpublished price sensitive information or having access to unpublished price sensitive information then his dealing in securities of listed company shall be governed by internal code of conduct[3].

Further names of persons with whom UPSI is shared or have access to UPSI is entered in structured digital database maintained under regulation 3(5) of SEBI PIT

Hence even if a person is relieved from the services of the listed company, he would continue to be in possession of UPSI till that UPSI becomes public.

In such scenarios he would still be considered as designated person and trading of his and his immediate relatives would be governed by code of conduct.

[1] https://www.sebi.gov.in/sebi_data/faqfiles/apr-2023/1680758865899.pdf

[2] regulation 9(4) of SEBI PIT

[3] Clause 3