Clause

Description

Regulation 4(1)

No insider shall trade in securities (listed or proposed to be listed) while in possession of Unpublished Price Sensitive Information (UPSI).

Explanation

If a person trades while in possession of UPSI, it is presumed that the trade was influenced by that information. The burden of proof then shifts to the insider to demonstrate innocence.

S.No.

Permitted Circumstance

Key Conditions

(i)

Off-market inter-se transfer between insiders

- Both parties possess the same UPSI without breaching Regulation 3.
- Both made a conscious and informed trade decision.
- UPSI was not obtained under Regulation 3(3).
- Such trade to be reported to the company within 2 working days.
- Company must notify the stock exchange within 2 trading days of disclosure or becoming aware.

(ii)

Block deal window mechanism

- Both parties in possession of the same UPSI without breaching Regulation 3.
- Conscious and informed trade decision.
- UPSI not obtained under Regulation 3(3).

(iii)

Statutory or regulatory obligation

- The transaction is carried out pursuant to a statutory or regulatory requirement to execute a bona fide trade.

(iv)

Exercise of stock options

- Exercise price pre-determined and compliant with applicable regulations.

(v)

Non-individual insiders

(a) Individuals possessing UPSI are different from those making trading decisions.
(b) Decision-makers were not in possession of UPSI when trading decisions were made.
(c) Adequate Chinese-wall arrangements exist to prevent UPSI communication.
(d) No evidence of breach of such arrangements.

(vi)

Trading plan under Regulation 5

- Trades carried out strictly as per a valid and pre-approved trading plan in compliance with Regulation 5.

Aspect

Explanation

Presumption

When a person trades while in possession of UPSI, it is presumed that such trade was influenced by the information.

Irrelevance of motive

The reasons or purposes for which the trade was made are not relevant in determining violation.

Burden of proof

Once possession of UPSI and trading are established, the insider must prove innocence through one of the permitted defences.

Category

Onus of Proof

Connected persons

Must prove that they were not in possession of UPSI at the time of trading.

Other persons

The burden lies on the Securities and Exchange Board of India (SEBI) to establish that such persons were in possession of UPSI.

Clause

Description

Regulation 4(3)

SEBI may, from time to time, specify additional standards, requirements, or guidelines necessary for implementation of these regulations.