Sebi Extends Framework For Restricting Trading By Designated Persons By Freezing PAN To All Listed Companies In Phases

Sebi on Wednesday extended the framework for restricting trading by Designated Persons (DPs) during the "trading window closure" by freezing PAN at security level to all listed companies in a phased manner beginning October.

At present, the framework is applicable to listed companies that are part of benchmark indices -- Nifty 50 and Sensex.

To ensure smooth implementation of the framework, the regulator prescribed a glide path, the Securities and Exchange Board of India (Sebi) said in a circular.

Under this, the new rules will be applicable for top 1,000 companies in terms of BSE market capitalisation from October 1; next 1,000 firms from January 1, 2024; and remaining companies listed on BSE, NSE and MSEI from April 1, 2024.

For those companies making debut on stock exchanges after issuance of this circular, the rule will apply from the first day of the second quarter from the quarter in which the company gets listed.

Considering the satisfactory implementation of the framework for the listed companies forming part of benchmark indices and the consultations held with the stock exchanges and depositories, the framework has been extended to all the listed companies, Sebi said.

The Sebi PIT (Prohibition of Insider Trading) rules prohibit trading by a DP when the trading window is closed.

In August 2022, the regulator laid down a framework for developing a system, wherein permanent account numbers (PANs) of a company's designated persons are frozen for a specific period to curb inadvertent trades during the trading window closure.

Initially, the framework was applicable to declaration of financial results of listed companies that are part of Nifty 50 and Sensex.

The restriction on trading is for on-market transactions, off-market transfers and creation of pledge in equity shares and equity derivatives contracts (Futures and Options) of such listed companies.

Under the process for implementation of the system, the DP is required to provide access to a listed company on a portal for specifying the trading window closure period. The portal auto-populates details of DPs like PAN and name. The listed company updates PAN of DPs to be frozen and "start and end date" of trading window closure period.

Further, the company selects or de-selects PANs of DPs at least two trading days prior to start of the trading window closure period.

Subsequently, the designated depository provides relevant data to stock exchanges and other depositories by next trading day -- T-1 day -- and on a daily basis for any updation in DPs during trading window closure period.

From T day, depositories and stock exchanges restrict trading of the DP concerned till the end of the trading window closure period.

Any addition or exemption to a DP during the trading window closure period is to be effected within two trading days of intimation by company.