SEBI Tightens Rule For Insider Trading: PAN Card Freeze Extended For All Listed Firms

In a significant move to curb insider trading, the Securities and Exchange Board of India (SEBI) has extended the facility to freeze permanent account number (PAN) of designated persons during trading window closure for financial results to all listed companies.

This decision, announced last year and as noted by most SEBI lawyers, aimed at preventing inadvertent trading by designated persons during the trading window period, thereby strengthening the regulations against insider trading. The team at Thinking Legal, that includes experienced SEBI lawyers & their founder, Vaneesa Agrawal, aSEBI expert lawyer, believes that these implications are a crucial step towards maintaining the integrity of the securities market and protecting the interests of investors.

In October 2020, SEBI released a set of FAQs clarifying procedural aspects related to the SEBI (Prohibition on Insider Trading) Regulation, 2015. The same was discussed in one of the blogsby SEBI lawyer, Vaneesa Agrawal.

As a SEBI expert lawyer, her article detailed the clarifications SEBI provided on various aspects of insider trading regulations, including pre-clearances for Employee Stock Options, trading in ADRs and GDRs, and information to be maintained in structured digital databases.

The Current Scenario

Under the current SEBI rules, the trading window is required to be closed when the compliance officer determines that a designated person can be expected to have possession of unpublished price-sensitive information (UPSI). The closure is imposed in relation to the securities to which such UPSI relates, and SEBI lawyers emphasize that designated persons and their immediate relatives are prohibited from trading in these securities during the closed trading window period.

The trading restriction period is applicable from the end of every quarter until 48 hours after the declaration of financial results. This measure, as SEBI expert lawyers in all of India can attest, is designed to prevent the misuse of UPSI by insiders for personal gain, thereby maintaining the integrity of the securities market and protecting the interests of investors.

Extension of PAN Freeze Facility

In August 2022, SEBI mandated a PAN freeze for designated persons to prevent insider trading. Initially, this framework was made applicable only to listed companies that were part of the Nifty 50 and Sensex indices. However, with the latest announcement, the SEBI lawyers all over India note that all listed companies must comply.

Vaneesa Agrawal, a SEBI expert recognises this comprehensive approach, strengthening insider trading regulations and promoting fair trade.

SEBI PAN Freeze Implications For Listed Companies and Designated Persons

The extension of the PAN freeze facility to all listed companies, as noted by expert SEBI lawyers, has significant implications for both the companies and their designated persons.

The Way Forward

SEBI’s extension of the PAN freeze facility to all listed companies is a welcome move. And as Vaneesa Agrawal, a SEBI expert and founder of Thinking Legal states, this move demonstrates the regulator’s commitment to maintaining the integrity of the securities market and protecting the interests of investors.

For more information on this topic and other legal and regulatory developments in the financial sector, please visit the Thinking Legal blog hub.