Role of Company Secretary in Insider Trading by CS Aakanchha vyas


The concept of Insider trading is regulated by SEBI (Prohibition on Insider Trading) Regulations, 1992. As per sec 195 of the Companies Act 2013, No person including any director or KMP of a Company shall enter into insider trading except any communication required in the ordinary course of business or profession or under any law.

Meaning of Insider Trading:-

Insider trading means an act of buying, selling or dealing in securities by the director or KMP of the company by accessing any price sensitive information in respect of securities of company. Price sensitive information means any information which relates to, directly or indirectly to a company and which if published is likely to materially affect the price of securities of the company.

Role of Company Secretary:-

A company secretary is a nodal point for all compliance related matter of the company. He is a link between the SEBI and the management and employees of the company. In relation to Insider trading regulation a company secretary have so many obligations such as:-

To frame a code of internal procedures and conduct in line with the model code specified in schedule I of the regulation and get the same approved from the Board of directors.

In case of unlisted company prepare the Chinese wall policy and prepared grey/ restricted list of securities.

To frame and monitor adherence of rules for the preservation of price sensitive information.

To monitor and confirm whether transaction for which pre clearance has been granted were executed within one week.

To maintain a record of all directors, officers and persons covered within the ambit of the term ‘designated employee’ and any changes in the same.

To suggest any improvement required in the policies, procedure etc.

To maintain a list of all information termed as ‘Price sensitive information’.

To maintain a record of names of files containing confidential information deemed to be price sensitive information and persons in charge of the same.

To ensure that computer data is adequately secured.

To keep records of periods specified as close period and the trading window.

To ensure that trading window is closed at the time of :-

 

  • Declaration of financial results
  • Declaration of dividend
  • Issue of securities by way of public/right/bonus
  • Any major expansion plans or execution of new projects
  • Amalgamation, mergers, takeovers and buy back
  • Disposal of whole or substantially whole of the undertaking
  • Any changes in policies, plans or operations of the company.
To ensure that :-

  1. Trading window is opened 24hour after the information mention above is made public.
  2. The trading restriction are strictly observed and that all directors, officers, employees conduct their dealing in the securities of company  only in valid trading window and Do not deal in the company’s securities during the period when the trading window is closed.
  3. No sale of shares allotted on exercise of ESOPs is made during a close period.
  4. To process the application received for pre clearance of transactions from the director, officers, designated employees.
  5. To confirm whether the directors, designated employees executed their order in respect of securities of company within one week after the approval of pre-clearance is given.
  6. A minimum holding period as specified by the company, which is not less than 30 days is observed by all the directors/officers.
  7. To waive the requirement of holding period under certain circumstances.
  8. To receive and maintain records of periodic and annual statement of holdings from directors/officers and their dependant family members.
  9. To maintain records of all disclosures made by directors/officers for minimum period of three years.
  10. To place before the managing director or committee of directors specified for the purpose, on a monthly basis all the details of the dealings in the securities by directors/officers of the company and the accompanying documents that such person had executed under the pre clearance procedure.
  11. To implement the punitive measures or disciplinary actions prescribed for any violation of the code of conduct.

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