Insider trading is defined as a malpractice wherein trade of a company's securities is undertaken by people, who by virtue of their work or relationship with the people working with the company (defined as Insider), have access to the otherwise non-public information which can be crucial for making investment decisions.

It gives an unfair advantage to the Insider with respect to understanding the financial position of the company, whereas the other shareholders and investors are at a great disadvantage due to lack of important insider non-public information.

SEBI has made the compliance officer of an organisation to be responsible for monitoring all the trade made by Access/ Designated employees and close the trading window for the trade if the employees could be in possession of non-public Information.

It mandates the compliance department to create a base framework (using sebi guidelines on Prohibition of insider trading ) for regulating the Trading in securities by Employees as well as their Dependants including spouses.

As per the new amendment, SEBI has made additional compliances where all listed companies and connected persons as defined under the regulation are required to maintain a structured digital database with adequate internal controls, containing the name(s) and PAN Number(s) of the person(s) with whom UPSI is shared and the nature of UPSI. Also maintaining a list of all employees and other persons with whom unpublished price sensitive information is shared and confidentiality agreements signed.

On July 17, 2020, SEBI notified the Securities and Exchange Board of India (Prohibition of Insider Trading) (Amendment) Regulations, 2020 (“PIT Amendment”), to introduce further changes to the PIT Regulations.

• Enhancement of the structured digital database towards seeking and storing additional details of persons sharing unpublished price sensitive information (“UPSI”)
• Automation of shareholding disclosures and change in reporting authority for making disclosures of PIT violations by listed entities, market intermediaries and fiduciaries.
• Introduction for additional transactional mechanisms as an exception to trading window restrictions.

Initial disclosure

Every Promoter, Key Managerial Personnel and Director of the Company whose securities are listed on any recognized stock exchange shall disclose (Form 4) his holding of securities of the Company as on the date of these regulations taking effect to the Company within thirty days of these regulations taking effect

Continual Disclosure

Every promoter, designated employee and Director of every Company shall disclose in Form 5 & 6 to the Company the number of such securities acquired or disposed of within two trading days of such transactions if the value of the securities traded, whether in one transaction or a series of transactions over any calendar quarter, aggregates to a traded value in excess of Rs.10 lakhs or such other value as may be specified.

The base guidelines for Prohibition of Insider Trading is as per SEBI insider trading guidelines 1992. SEBI has been making amendments to the policy every year to ensure Insider trading policy framework becomes more robust. Few of the major recent amendments have been coming almost every year i.e. 2015, 2018, 2019 as well as in 2020.

Tracking details like Initial Holding, Transaction Requests, Transaction Reporting, Periodic Disclosures, for employees as well as all the dependents, is a huge task while managing it using a combination of emails and excel sheets.

It also becomes almost impossible to track violations of Holding period/ Contra transactions, UPSI as well as Restricted lists for different employees using excel information.

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