Sebi clarifies on structured digital database, contra trade

New Delhi, Mar 31 (PTI) Capital markets regulator Sebi on Friday said that listed companies should maintain structured digital database internally, comprising details of the unpublished price sensitive information (UPSI) and details of persons with whom such information is shared.

In addition to this, the database also include details of persons who have shared such information, Sebi said in its 25-page comprehensive Frequently Asked Questions (FAQs).

Similarly, another structured digital database should be maintained internally by fiduciary or intermediary, capturing such information.

The database needs to be preserved for at least eight years after completion of the relevant transactions. In case of receipt of any information from Sebi regarding any investigation or enforcement proceedings, such information in the database needs to be maintained till the completion of such proceedings.

In addition, the regulator clarified that giving shares as a gift by promoter of listed companies is considered trade and need to be complied with requirement of disclosure, pre-clearance and contra trade restrictions.

Trading includes subscribing, buying, selling, dealing, or agreeing to subscribe, buy, sell, deal in any securities, and accordingly gifting will be considered as dealing in share, Sebi said.

“Thus, gift is a trade and the promoter shall be required to comply with requirement of disclosure, pre-clearance and contra trade restrictions,” it added.

Contra trade in market parlance refers to transaction involving shares of the company by a designated person and executing a contra or opposite trade within 6 months after the prior transaction.

The clarification comes as Sebi revised and updated it’s FAQs particularly, with regard to structured digital database and contra-trade.

Further, in order to provide more clarity and ease of reference, these FAQs have been categorised subject-wise under various headings such as trading, structured digital database, disclosures, pledge, trading plan, pre-clerance.

As per the new FAQ, any share transaction by a company’s Designated Person (DP) and his immediate relatives, within 6 months of an earlier sell or buy trade, where both the trades have been done in open market will tantamount to “contra trade”.

In respect of ESOPs, subscribing, exercising and subsequent sale of shares, so acquired by exercising ESOPs, shares will not attract contra trade restrictions. Further, if the ESOP shares are sold in multiple transactions, it will not attract contra trade restrictions.

With regard to futures and options, the regulator said that any derivative contract that is physically settled on expiry will not be considered to be a contra trade.

However, closing the contract before expiry would mean taking contra position. Trading in index futures or such other derivatives where the scrip is part of such derivatives need not be reported.

Moreover, any acquisition or disposal of securities by way of rights issue, Follow-on Public Offer (FPO), Offer for Sale (OFS), bonus issue, share split, merger, demerger, would not attract restriction of ‘contra-trade’, provided the initial transaction of disposal was completed in accordance with insider trading rules.