Securities and Exchanges Board of India on November 24, 2023 floated a new consultation paper suggesting a change in the way insiders reveal their trading plans (TP) to the public. According to the proposal, insiders might be permitted to mask personal details, such as name and designation, while notifying their trading plans to public. Instead they have to share these information solely with the exchanges.
Company insiders, typically company's senior managerial executives, often possess unpublished price-sensitive information (UPSI) and can rely on these information to conduct trades. In India, trading stocks based on such undisclosed company information is prohibited to maintain market fairness. However, insiders are allowed to trade, provided they are not in possession of UPSI and also they might need to conduct trades under specific circumstances, such as creeping acquisitions, compliance with minimum public shareholding norms, etc. To facilitate such situations, 'Trading Plans' (TP) were introduced in 2015 to help them trade even if they are in possesion of UPSI. However, now the market feedback indicates that the current regulations are stringent, the requirements are hard to be met and therefore TPs weren't popular. So Sebi's working group has sugested some modifications
Proposed Modifications to Trading Plans
The proposed modifications are as follows:
Cool-off period Reduced: The minimum cool-off period or the waiting period between disclosure of TP and implementation of TP may be reduced to four months from six months.
Minimum Coverage period Reduced: The minimum coverage period requirement of trading plans may be reduced to two months from twelve months.
Black Out Period Eliminated: Sebi suggested doing away with rules that restrict trading during specific periods.
Introducing Price Limits: The insider shall have flexibility, during formulation of TP, to provide price limits i.e. upper price limits for buy trades and lower price limits for sell trades. "Such price limit shall be within +/-20% of the closing price on date of submission of TP. If price of the security, during execution, is outside the price limit set by the insider, the trade shall not be executed. If no price limit is opted for, the trade has to be undertaken irrespective of the prevailing price," Sebi release said
Enhanced Privacy For Insiders By Masking Details From Public
Two seperate disclosures of TP is under consideration. A confidential submission of all personal details that remains confidential to the stock exchanges. Another submission excluding personal details, for public disclosure through stock exchanges is also being considered. "The disclosure of the TP to the stock exchange (with personal details) will remain confidential with stock exchanges and the disclosure without personal details will be made public. To counter any concerns of possible misuse arising from masking of names from the public, a unique identifier viz., a common reference number with time stamp may be put on these filings for reconciliation purposes," the release said.
The consultation paper is open for public comments until December 15, 2023.