SEBI’s System Driven Disclosure
SEBI’s System Driven Disclosure
The Securities and Exchange Board of India, vide circular dated 9th September 2020, has provided the manner of implementation of System Driven Disclosure for members of promoter groups, designated person (in addition to promoters) and directors of a company under regulation 7(2) of the SEBI (Prohibition of Insider Trading) Regulations, 2015.
The present article highlights the newly introduced System Driven Disclosure which is likely to regularize the disclosure filing requirements of the entities/ listed company. The same will also enable transparency in the trading activity of the entities/ listed company.
The flow of events adopted for system driven disclosure-
Following table narrates the flow of events adopted by SEBI for system driven disclosure-
|1st December 2015||Initiative for implementation of system driven disclosure in multiple phases.|
1st January 2016
|Disclosure relating to changes in shareholding of promoter or promoter group of the listed entities under the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations and SEBI (Prohibition of Insider Trading) Regulations.|
28th May 2018
|Disclosure under 29(1) and (2) of the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations and regulations 7(2) of the SEBI (Prohibition of Insider Trading) Regulations relating to the directors and employees of the company. (provisions effective from 1st August 2018).|
9th September 2020
|Disclosure for members of promoter groups, designated person (in addition to promoters and directors). (Provisions effective from 1st October 2020).|
Applicability of new provisions-
The new provisions implement the System Driven Disclosure under Regulations 7(2) of the SEBI (Prohibition of Insider Trading) Regulations, 2015. The same is applicable to the member of the promoter group, the designated person (in addition to the promoter) and director of the company.
The System Driven Disclosure shall pertain to the trading in equity shares and equity derivate instruments (like futures and options) of the listed company, wherever applicable, by the entities.
The procedure of implementation of System Driven Disclosure-
STEP 1 – The listed company will provide PAN number of the Promoters (including a member of the promoter group, designated person and directors) to the designated depository within 10 days from the date of the circular.
Some essential points-
- The listed company will provide a demat account number of PAN exempted entities.
- In case of change in details, the listed company should update the designated depository on the same day.
STEP 2 – The designated depository will share the details received from the listed company to other depository.
STEP 3 – Based on the details, the depository will tag the demat account in their depository system at ISIN level. Following data with regard to the tagged demat account will be provided by the depository to the stock exchange-
- Off market transactions of the entities.
- Corporate actions like a bonus, ESOP, rights etc. of the entities.
- Transmission of the shares of the entities.
- Transactions for revocation or pledge or invocation of shares and other encumbrances.
- Market transfers (only in case of PAN exempted entities).
Above details are to be provided on a daily basis.
Some important points and dates-
- The disclosure relating to the SEBI (Prohibition of Insider Trading) Regulations, 2015 will be circulated on the website of the respective stock exchange with effect from 1st October 2020.
- The entities will, however, continue to comply with the existing disclosure system as applicable till 31st March 2021.
New System Driven Disclosure benefit to the stock exchange–
As seen above, day to day transactions will be provided by the depository to the stock exchange. Based on the data, the stock exchange will recognize the transactions carried out on their trading system. The stock exchange will share such trading information with other stock exchange wherein the securities of the company are being listed.
The disclosure will help the stock exchange to consolidate the information/ data of the transactions (which includes the data received from other stock exchange and the depository). Based on the consolidation, in case the transaction value exceeds the ceiling limit prescribed under the SEBI (Prohibition of Insider Trading) Regulations, 2015. Then, the stock exchange can easily disseminate information about the transaction on SEBI’s website.