SEBI aligns disclosure formats with amended PIT Regulations
Carries out certain clarificatory modifications.
By CS Aisha Begum Ansari, Assistant Manager, Vinod Kothari & Company aisha@vinodkothari.com
Securities and Exchange Board of India (‘SEBI’) had specified the formats for disclosures under Regulation 7 of SEBI (Prohibition of Insider Trading) Regulations, 2015 (‘PIT Regulations’) on 11th May, 2015[1] and thereafter revised the formats on 16th September, 2015[2].
SEBI has revisited the formats and carried out further modifications to align the format with amendments in the PIT Regulations and certain edits for clarification purpose, vide circular dated 9th February, 2021[3] with immediate effect.
This article provides a gist of the amendments carried out in the formats. Before discussing the amendments, a brief synopsis of various disclosure requirements under regulation 7 of PIT Regulations is as under:
| Form | Relates to | Applicable to | Disclosure requirement | Time limit |
| Form B | Initial disclosure | KMP/ director/ promoter/ member of the promoter group | Disclose the holdings in the company as on the date of appointment or becoming a promoter | Within 7 days of appointment or becoming a promoter |
| Form C | Continual disclosure | Promoter/ member of the promoter group/ designated person/ director | Disclose the number of securities traded, if the value of securities traded exceeds Rs. 10 lakhs in a calendar quarter (whether in one transaction or series of transactions) | Within 2 trading days of such transaction.
|
| Form D (Indicative format) | Disclosure by Connected Person (event based) | Other connected persons | Disclose the holdings and trading in the securities of the company | As determined by the company |
Details of amendment in the formats
The major amendments in the revised formats under PIT Regulations are as under:
| Form | Field in the Form | Erstwhile format | Revised format | Remarks |
| Form B | Field w.r.t. “Category of Persons” | The details were sought from promoters, directors, KMPs and such other person mentioned in regulation 6(2) | The details will be sought from promoters, members of the promoter group, directors, KMPs, immediate relatives and such other person mentioned in regulation 6(2) | Members of the promoter group is added in the revised format to align with regulation 7. |
| Form C
|
Field w.r.t. “Category of Persons” | The details were sought from promoters, directors, employees and such other person mentioned in regulation 6(2) | The details will be sought from promoters, members of the promoter group, designated persons, directors, immediate relatives and such other person mentioned in regulation 6(2) | Members of the promoter group and designated persons are added in the revised format to align it with regulation 7. |
| Form C | Newly inserted: Note (ii) under sub-heading-1[4] | No particular note regarding value of transaction | The note explains that the value of transaction excludes taxes, brokerage and any other charges. | Regulation 7(2)(a) of the Regulations states that the concerned person is required to give disclosure, if the value of the securities traded exceeds Rs. 10 lakhs in a calendar quarter.
The note is provided to clarify that the value of securities is exclusive of taxes, brokerage and other charges. |
| Form D | Newly inserted: Note (ii) under sub-heading-1[5] | No particular note regarding value of transaction | The revised format defines the value of transaction which excludes taxes, brokerage, any other charges. | Regulation 7(3) of the Regulations states that the connected person is required to give disclosure as and when required by the company.
The note is provided to clarify that the value of transaction to be disclosed should be exclusive of taxes, brokerage and other charges. |
| Form B, C and D
|
Sub-field w.r.t “Type of Security” under the following Fields:
a. Securities held prior to acquisition/ disposal b. Securities acquired/ disposed c. Securities held prior to acquisition/ disposal |
The format sought the details of the following securities:
a. Shares b. Warrants c. Convertible debentures, etc. |
Details will be now sought for the following securities:
a. Shares b. Warrants c. Convertible debentures d. Rights entitlements, etc. |
SEBI, vide circular dated 22nd January, 2020[6], introduced the concept of dematerialized rights entitlements. Pursuant to the circular, the rights entitlement are also traded on the secondary market platform of the stock exchange.
Thus, SEBI has added the requirement to give details of rights entitlement. |
| Form C and D | Sub-field w.r.t. “Transaction type” under the Field “Securities acquired/ disposed” | The format sought the nature of transaction which included:
a. Buy b. Sale c. Pledge d. Revocation e. Invocation |
The options for nature of transaction will now include:
a. Purchase b. Sale c. Pledge d. Revocation e. Invocation f. Others (to be specified) |
The transaction can be other than purchase, sale or pledge of securities, e.g. gift of securities. Accordingly, the person will have to specify the nature of transaction in the disclosure. |
| Form C and D | Newly inserted: Field w.r.t. “Exchange on which the trade was executed” under sub-heading- 1 | No field for details of stock exchange | In the revised format, a new field has been inserted to mention the stock exchange on which the securities were traded. | In the earlier format, there was a field to mention the stock exchange on which derivatives were traded, but not for the trade in securities. The new insertion is made to align the format for trading in securities with that of trading in derivatives. |
Conclusion and actionables
The revised formats issued by SEBI will reflect the information of trade in more appropriate manner and is surely a welcome move.
The listed companies will be required to amend the Forms annexed to their Code of Conduct for Prevention of Insider Trading in order to align them with the revised formats.
Further, SEBI vide circular dated 9th September, 2021[7], automated the continual disclosures under regulation 7(2) of the Regulations by providing the manner of system driven disclosures. Pursuant to the circular, the listed companies will be required to comply with existing system for giving disclosure till March 31, 2021. Accordingly, the listed entities will have to amend the Form C annexed to their Code of Conduct and continue to give disclosure in the said form till 31st March, 2021.
Our other material can be accessed through the below links:
- Guide to PIT Documentation
http://vinodkothari.com/2019/02/guide-to-pit-documentation/
- Highlights of 2nd Amendment to PIT Regulations
http://vinodkothari.com/2019/07/highlights-of-2nd-amendment-to-pit-regulations/
- Amendments in SEBI(PIT) Regulations, 2015 : From April, 2019 to July, 2020
http://vinodkothari.com/2020/07/recent-amendments-in-pit-regulations/
[1] https://www.sebi.gov.in/legal/circulars/may-2015/disclosures-under-sebi-prohibition-of-insider-trading-regulations-2015_29783.html
[2] https://www.sebi.gov.in/legal/circulars/sep-2015/revised-disclosure-formats-under-sebi-prohibition-of-insider-trading-regulations-2015_30680.html
[3] https://www.sebi.gov.in/legal/circulars/feb-2021/revised-disclosure-formats-under-regulation-7-of-sebi-prohibition-of-insider-trading-regulations-2015_49068.html
[4] Details of change in holding of securities of promoter, member of the promoter group, designated person or director and immediate relatives of such persons and other such persons as mentioned in Regulation 6(2) under Form C
[5] Details of trading in securities by other connected persons as identified by the company under Form D
[6] https://www.sebi.gov.in/legal/circulars/jan-2020/streamlining-the-process-of-rights-issue_45753.html
[7] https://www.sebi.gov.in/legal/circulars/sep-2020/automation-of-continual-disclosures-under-regulation-7-2-of-sebi-prohibition-of-insider-trading-regulations-2015-system-driven-disclosures_47523.html
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