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Amendments to SEC Prohibition of Insider Trading Regulations

Amendments to SEC Prohibition of Insider Trading Regulations

SEC has amended the SEC Prohibition of Insider Trading Regulations vide notification dated 19th  November 2008, available  here . While I will post here later in more detail some issues relating to the amendments, let me highlight a couple of points.

The definition of insider has been amended. Interestingly, there is magic  involved here! Not one word has been added or deleted. But the meaning of the term insider has changed substantially! For example, now, any person who receives or has access to unpublished price sensitive information is an insider.  (This magic is achieved by dropping just one comma and breaking up the definition in into two paragraphs). 

It is also required that the Code to be framed by listed companies, etc. in a form as near to the Model given should be framed “without diluting (the Model) in any manner and ensure compliance of the same. It will be interesting to examine what the words without diluting could mean, in law. 

As per the amended Code, Directors/officers/designated employees are prohibited from carrying out an opposite transaction for six months. Thus, if such a person buys even one share, he cannot sell any share for six months. And, if he sells even one share, he cannot buy even a single share for six months. 

 

A transitional issue will arise as to whether this restriction would apply even if purchases/sales were made before this amendment. 

 

Furthermore, it seems that such persons, as per the amended Code, cannot at all and ever take any position in derivatives relating to shares of the Company!

 

There are other changes and I will post a more detailed discussion in a day or two on the amendments.

 

   Jayant Thakur 

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CA Jayant Thakur

4 comments


  • Hi AR,

    I had given the link in my post – anyway, its as follows:-

    http://www.SEC.gov.in/acts/prohibition.pdf

    It is a pdf file so either you can open it in your browser itself (assuming you have enabled it to open pdf files) or you can just download that file using the above url through a downloader (that is the best I can do with my v limited technical knowledge).

    Let me know if you still can’t – if you can post your email ID, I can email the file to you.

    – Jayant

  • hi
    i urgently needed to know the reason behind the amendment. was it because of some case?
    thanks
    awaiting a reply …

  • hi
    i urgently need to know the reason behind this amendment. was it because of some important case?
    thanks
    awaiting a reply

    zeenat

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