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SEBI proposes modification to make Trading Plans more flexible

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SEBI has recently issued a Consultation Paper proposing modifications to the provisions concerning ‘Trading Plans’ under the SEBI (Prohibition of Insider Trading) Regulations, 2015, with the aim of introducing greater flexibility to perpetual insiders. The Consultation Paper is based on a Report of a Working Group relating to Trading Plans constituted in July 2023 following the budget speech for FY 2023-24 by the Hon’ble Finance Minister of India Smt. Nirmala Sitharaman ji who emphasized on initiatives towards simplification, ease of doing business and reducing cost of compliance for companies.

Briefly, a Trading Plan is a tool which allows Insiders such as Senior Management and Promoters of a company who may consistently be in possession of Unpublished Price-Sensitive Information (UPSI) to trade in the shares of their company by scheduling their trades through an irrevocable Trading Plan.

Interestingly, the SEBI Report notes that in F.Y. 2022-2023 there were only 76 Trading Plans approved between the 4,680 companies listed on BSEIndia and 2,191 companies listed on NSE India having in total 2,56,878 Designated Persons between them.

The SEBI Consultation Paper has inter alia proposed to shorten the cooling off period between approval of a trading plan to implementation from 6 months to 4 months. Further, the minimum period for a Trading Plan has also been reduced from 12 months to 2 months.

In this background, The Hindu BusinessLine has featured an article discussing the major changes proposed to Trading Plans by SEBI.  

“The article features views of Mr. Sumit Agrawal, Managing Partner, Regstreet Law Advisors and former SEBI officer, who observed that, “These adjustments cater to individuals with short-term financial objectives who couldn’t fully benefit from existing norms. The concept paper suggests granting perpetual insiders more flexibility in determining the duration of their trading plans, moving away from the rigid 12-month requirement, and aligning better with diverse financial needs and market dynamics,”.

Readers are welcome to send their views to Regstreet Law Advisors at info@regstreetlaw.com.  

A copy of The Hindu Business Line article is enclosed below and also accessible at: https://www.thehindubusinessline.com/markets/sebi-proposes-4-month-cool-off-period-for-trading-plans/article67570547.ece

A copy of the SEBI Consultation can be accessed via the following link:  https://www.sebi.gov.in/web/?file=https://www.sebi.gov.in/sebi_data/attachdocs/nov-2023/1700818527835.pdf#page=5&zoom=120,-6,641