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Recent regulatory developments for listed entities – critical changes under LODR and PIT Regulations

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Workshop on Structured Digital Database for Insider Trading: Preparing for the Compliance Certificate

In view of the overwhelming response received on our earlier session on the topic held on 9th November, 2022, we are announcing a repeat session on 15th November, 2022

Click here to register for the workshop – https://forms.gle/JgWXqp2JJUBX4wPm8
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Structured Digital Database under PIT Regulations: Preparing for the Compliance Certificate (Presentation)

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Guide to Compliance Certificate for Structured Digital Database under PIT Regulations

– Vinod Kothari | corplaw@vinodkothari.com

The requirement of maintaining a structured digital database (SDD) arises from Reg 3 (5) of the PIT Regulations, 2015. The PIT Regulations itself does not talk about any compliance certificate as to maintenance of the SDD. However, the requirement of such a certificate emanates from the mails sent by national stock exchanges dated 4th August, 2022. 

The requirement of the certificate was made effective from Q1 of 2022-23; however, no format of the certificate was provided so far. Vide the BSE’s notice no. 20221028-15 and 20221028-16 dated 28th October, 2022, issued for equity and debt listed entities respectively, the stock exchange has provided the format of the certificate. The said letter also states that the compliance certificate may be given either by the compliance officer of the company, or by a practising company secretary.

In this write up, we have tried providing a basic guidance on the compliance certificate. While the article is primarily focused on certification by a practising professional, the approach may, with appropriate modifications, apply to certification by the compliance officer too.

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Workshop on Structured Digital Database for Insider Trading: Preparing for the Compliance Certificate

In view of the overwhelming response received for this session, we are announcing a repeat session on 15th November, 2022.

Click here for details.

Click here to register for the workshop – https://forms.gle/JgWXqp2JJUBX4wPm8
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Structured Digital Database: some emerging concerns

– Corplaw Division, Vinod Kothari & Company (corplaw@vinodkothari.com)

Maintenance of Structured Digital Database (“SDD”) has been mandatory since April 1, 2019 in view of the relevant provisions under the SEBI (Prohibition of Insider Trading) Regulations, 2015 (‘PIT Regulations’) reproduced below. The provisions inter-alia stipulates the responsibility, the details to be captured in the SDD, manner of maintenance and the preservation period. The entities  have been maintaining for the last 3 years, however, since quarter ending June 30, 2022 the entities are additionally required to submit a compliance certificate, based on the email received from the stock exchanges where its securities are listed, duly certified by the Compliance Officer. We have been given to understand that this submission will be mandated on a quarterly basis and the same will henceforth required to be submitted duly certified by a practising company secretary. As on date, no SEBI circular or Exchange circular has been issued in this regard.

The last date for submission for the immediately preceding quarter was August 9, 2022. Based on the client queries received in this regard, format of the compliance certificate provided by the stock exchange and the views from the representatives of SEBI and stock exchanges as expressed in seminars from time to time, we intend to highlight certain points of concerns for your kind consideration.

Relevant provisions of Law:

Reg. 3 (5) and (6) of PIT Regulations:-

(5) The board of directors or head(s) of the organisation of every person required to handle unpublished price sensitive information shall ensure that a structured digital database is maintained containing the nature of unpublished price sensitive information and the names of such persons who have shared the information and also the names of such persons with whom information is shared under this regulation along with the Permanent Account Number or any other identifier authorized by law where Permanent Account Number is not available. Such database shall not be outsourced and shall be maintained internally with adequate internal controls and checks such as time stamping and audit trails to ensure non-tampering of the database.

(6) The board of directors or head(s) of the organisation of every person required to handle unpublished price sensitive information shall ensure that the structured digital database is preserved for a period of not less than eight years after completion of the relevant transactions and in the event of receipt of any information from the Board regarding any investigation or enforcement proceedings, the relevant information in the structured digital database shall be preserved till the completion of such proceedings.

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FAQs on Structured Digital Database

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Our other materials on the topic:

  1. Discussion on Structured Digital Database
  2. SEBI prescribes norms for structured digital database, system-driven disclosures & CoC violations
  3. Amendment in SEBI (PIT) Regulations, 2015
  4. FAQs on SEBI (PIT) Regulations
  5. Discontinuation of manual disclosures under PIT Regulations

SEBI automates continual disclosures under PIT and SAST regulations

Physical disclosures to continue in certain cases

Updated as on September 23, 2020, June 16, 2021, August 25, 2021 and March 07, 2022

– Team Vinod Kothari and Company

(corplaw@vinodkothari.com)

Introduction & Background

SEBI, in its Board meeting dated June 25, 2020, discussed and approved necessary amendments[1] in SEBI (Prohibition of Insider Trading) Regulations, 2015 (‘PIT Regulations’) that were notified vide gazette notification[2] dated July 17, 2020. One of the amendments made pertained to insertion of enabling power to prescribe format for continual disclosures under PIT Regulations in order to mandate System Driven Disclosures (‘SDD’).

Earlier, in December 2015[3], SEBI had notified SDD in the first phase pertaining to acquisition/ disposal of equity shares by promoters/ promoter group based on specified thresholds under the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 (‘SAST Regulations’) and PIT Regulations and pledge of equity shares by promoters/promoter group under the SAST Regulations. Thereafter, in May 2018[4] next phase of SDD was implemented for disclosure under Reg. 29(1) and 29(2) of SAST Regulations by non-promoters and continual disclosures under Reg. 7(2) of PIT Regulations for directors and employees. Refer Figure 1: Flow of events in relation to SDD.

Thereafter, SEBI vide circular[5] dated September 09, 2020, superseded the aforesaid circulars dated December 01, 2015, December 21, 2016 and May 28, 2018 with respect to implementation of SDDs under PIT Regulations and mandated SDD for trading in equity shares and equity derivative instruments i.e. Futures and Options of the listed company (wherever applicable) by the entities. Read more