SEBI Disallows Extension Of Trading Window For Insiders
The headquarters of the Securities and Exchange Board of India (SEBI) in Bandra-Kurla Complex, Mumbai, India. (Photographer: Sajeet Manghat/ BloombergQuint)

SEBI Disallows Extension Of Trading Window For Insiders

The market regulator has disallowed any relaxation of regulations prohibiting insiders from transacting in shares between the end of every quarter and public announcement of financial earnings for that period.

“SEBI has informed the exchange that these requests seeking relaxation in applicability of trading window restrictions with regard to financial results for quarter/financial year ending March 31, 2020 have not been acceded to,” the Bombay Stock Exchange said in a notification.

As per the Securities and Exchange board of India’s Prohibition of Insider Trading Regulation:

  • Trading restriction period can be made applicable from the end of every quarter till 48 hours after the declaration of financial results.
  • The gap between clearance of accounts by audit committee and board meeting should be as narrow as possible and preferably on the same day to avoid leakage of material information.

“I think the response from the exchanges is logical. As soon the quarter has ended, the assumption is that promoter and insiders are aware of the quarterly performance of the company,” said Prashant Gupta, partner at law firm Shardul Amarchand Mangaldas. “Allowing them any relaxation in the trading window would be an absurdity.”

The regulatory question arose after SEBI, on March 19, relaxed compliance requirement under certain provisions of the SEBI (LODR) Regulations, 2015 due to the Covid-19 pandemic. This included allowing companies to report shareholding information and annual and quarterly financial results by June 30 instead of May 30.

Gupta said no company was being coerced into delaying the announcement of financial results. “They can stick to the timelines and then the trading window will be open. The law cannot change —which is clear that you cannot trade on unpublished price sensitive information.”

Besides, the trading window would open within 48 hours of the financial results being announced, Somasekhar Sundaresan, an independent counsel, told BloombergQuint. SEBI’s clarification does not imply that trading windows will be shut till June 30.

“If a company were to declare results on April 30, the trading window may open in 48 hours of that date. If they did by June 15, it would be 48 hours from that date, “To say that no insider to any corporate may trade until June 30 is misreading of the position.”

Many companies had urged the regulator to relax the trading restriction period. With steep declines in share prices, on account of the coronavirus-led disruption across financial markets, several company promoters have used the opportunity to increase their shareholding. Among the Nifty 50 constituents, 12 saw controlling shareholders increase stake, BloombergQuint reported recently. But those purchases will now have to stop with the quarter having ended.

Insiders, such as promoters and top company officials, will be able to purchase shares from the open market only 48 hours after financial results for the January to March quarter have been announced.

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