Reforms to Strengthen Compliance and Dispute Resolution: SEBI

Context:

The Securities and Exchange Board of India (SEBI) has recently announced important updates aimed at enhancing compliance and resolving disputes efficiently in the securities market. These reforms focus on expanding automated trading restrictions and proposing a direct arbitration mechanism for specific types of complaints.

Extension of Automated Trading Window to Immediate Relatives

SEBI has extended the closure of the automated trading window to include immediate relatives of designated persons (DPs) in listed companies. This reform aims to prevent insider trading by expanding the scope of individuals who are prohibited from trading during specific periods when unpublished price-sensitive information (UPSI) is accessible.

Key Features:

• Immediate Relatives Included:
  • Spouses, children, parents, and siblings of DPs who are financially dependent or consult DPs for trading decisions.
• Phase-wise Implementation:
  • Phase 1 (July 1, 2025): The framework will apply to the top 500 listed companies by market capitalization.
  • Phase 2 (October 1, 2025): The rules will extend to all listed companies.
• Data Upload Requirements:
  • Companies must upload details of DPs and their immediate relatives, including PAN, names, and demat accounts.
• Automated Freezing:
  • Stock exchanges and depositories will ensure that trading windows are frozen based on the uploaded data. Any updates to this data must be processed within two trading days.
• Exemptions:
  • Exemptions from the trading window closure can be requested and will automatically be reversed after the exemption period.

Impact: This extension ensures comprehensive protection against insider trading risks, especially for high-value transactions involving immediate family members of designated persons.