Code of Conduct for Prohibition of Insider Trading
Regulation 9 of the regulations requires the board of directors of every listed company and market intermediary to formulate a code of conduct to regulate, monitor and report trading by its employees and other ‘connected persons’ towards achieving compliance with the regulations, adopting minimum standards as set out in schedule b of the regulations, without diluting the provisions of the regulations in any manner.
Section 195 of the companies act, 2013 provided that “no person including any director or key managerial personnel of a company shall enter into insider trading.
In the above context, Thyrocare Technologies Limited (the “Company”) has formulated this code of conduct for prohibition of insider trading (“code”).
The SEBI regulations prohibit an insider from trading in the securities of a company listed on any stock exchange on the basis of unpublished price sensitive information.
“unpublished price sensitive information” (upsi) means any information, which relates directly or indirectly, to the company or its securities, that is not generally available which upon becoming generally available, is likely to materially affect the price of the securities of the company.
“generally available” information means information that is accessible to the public on a non-discriminatory basis.
“upsi” includes, without limitation, information relating to the following:
- A. Financial results, financial condition, projections, forecasts of the company;
- B. Dividends (both interim and final);
- C. Change in capital structure;
- D. Mergers, de-mergers, acquisitions, de-listings, disposals and expansion of business and such other transactions; e. Changes in board of directors or key managerial personnel; and
- E. Material events in accordance with the listing regulations / agreement.
The SEBI regulations prohibit the communication of upsi to any person except as required under law. Further, procuring any person to trade in the securities of any company on the basis of upsi is also prohibited under SEBI regulations.
Violations of the SEBI regulations subject to insiders to severe penalties including fines and imprisonment.
The code shall be called “code for trading in the securities of thyrocare technologies limited by an insider (code). The code will come into force with immediate effect.
“compliance officer” means the company secretary for the purpose of administration of the insider trading code.
“connected person” means a connected person as defined in regulation 2(1)(d) of the regulations and for the purposes of this code, includes any person who is or has during the six months prior to the concerned act, been associated with the company, directly or indirectly, in any capacity including by reason of frequent communication with its officers or by being in any contractual, fiduciary or employment relationship or by being a director, officer or an employee of the company or holds any position including a professional or business relationship between himself and the company whether temporary or permanent, that allows such person, directly or indirectly, access to unpublished price sensitive information or is reasonably expected to allow such access.
The person enumerated below shall also be deemed to be connected persons if such persons have access to upsi or is reasonably expected to have access to upsi.
- A. An immediate relative of connected person
- B. A holding company or associate company or subsidiary company
- C. An intermediary as specified in section 12 of the SEBI act or an employee or director thereof
- D. An investment company, trustee company, assets management company or an employee or director thereof
- E. An official of a stock exchange or of clearing house or corporation
- F. A member of board of trustees of a mutual fund or a member of the board of directors of the asset management company of a mutual fund or is an employee thereof;
- G. A member of the board of directors or an employee, of a public financial institution as defined in section 2 (72) of the companies act, 2013;
- H. An official or an employee of a self-regulatory organization recognised or authorized by the SEBI;
- I. A banker of the company;
- J. A concern, firm, trust, Hindu undivided family, company or association of persons wherein a director of the company or his immediate relative or banker of the company, has more than ten percent of the holding or interest.
“Designated persons” the term designated person shall consist of, connected persons who are:
- A) promoters of the company;
- B) board of directors of the company;
- C) key managerial personnel of the company;
- D) all employees of secretarial department;
- E) general manager and above of legal, accounts and investor’s relation department;
- F) immediate relative(s) of the persons mentioned above.
“Chinese wall” means the limit up to which information may be revealed by an insider in furtherance of the insider’s legitimate purposes, performance of duties or discharge of his legal obligations.
“director” shall have the meaning assigned to it under the companies act, 2013.
“immediate relative” of a person means a spouse, or the parent, sibling or child of that person or his or her spouse, if they are either dependent financially on such person or consult such person in taking decisions relating to trading in securities.
“insider” means any person who is:
- A connected person or
- In possession of or having access to upsi.
“key managerial personnel” shall have the meaning assigned to it under the companies act, 2013 and who are designated as key management personnel by the board of directors.
“officer” shall have the meaning assigned to it under the companies act, 2013.
“promoter” shall have the meaning assigned to it under the SEBI (issue of capital and disclosure requirements) regulations, 2009 or any modification thereof.
“securities” shall have the meaning assigned to it under the securities contracts (regulations) act, 1956 or any modification thereof except units of a mutual fund.
“trading” means and includes subscribing, buying, selling, dealing, or agreeing to subscribe, buy, sell, deal in any securities, and “trade” shall be construed accordingly.
Words and expressions used and not defined in these rules but defined in the securities and exchange board of India act, 1992, the securities contracts (regulation) act, 1956, the depositories act, 1996 or the companies act, 2013 and rules and regulations made thereunder shall have the meanings respectively assigned to them in those legislations.
Prohibition on communicating or procuring upsi
An insider shall not –
- Communicate, provide, or allow access to any upsi, relating to the company or its securities, to any person including other insiders, except to the extent allowed by these rules;
- Procure from or cause the communication by an insider of upsi, relating to the company or its securities;
Provided that nothing contained above shall be applicable when an upsi is communicated, provided, allowed access to or procured:
- In furtherance of legitimate purposes, performance of duties or discharge of legal obligations pursuant to appropriate confidentiality and non-disclosure agreements being executed; or
- In the event the board of directors direct or cause the public disclosure of upsi in the best interest of the company; or
- Within a group of persons if such persons have been identified and secluded within a “Chinese wall” or information barrier by the compliance officer from the rest of the company for a particular purpose or for a specified period of time in furtherance of legitimate purposes, performance of duties or discharge of legal obligations, and are subjected to, among other conditions, additional confidentiality obligations, information barriers designed to prevent exchanges of upsi outside the “Chinese wall”, and the execution of an undertaking by such persons to abstain and / or forego trading during such seclusion or till the upsi no longer constitutes upsi.
Prohibition on insider trading
An insider shall not, directly or indirectly,
- I.Trade in securities that are listed or proposed to be listed when in possession of upsi;
- II.Trade in securities of the company except when the trading window is open and the insider is not in possession of upsi.
Provided the restriction in 2 (i) above shall not apply to:
- A) a transaction that is an off-market inter-se transfer between promoters who were in possession of the same upsi without being in breach of these rules and both parties had made a conscious and informed trade decision; and
- B) trades pursuant to a trading plan set up in accordance with these rules.
3.ESOPs of the company
- Exercising of ESOPs of the company by its employees may be made at any time in accordance with the company ESOP scheme irrespective of trading window restrictions.
- No prior approval is required for exercising options under ESOPs scheme of the company. However, pre-clearance should be obtained by designated persons for sale of such shares.
- There would be no minimum holding period requirement applicable for equity shares allotted pursuant to the ESOP scheme.
- A) the compliance officer shall notify a ‘trading window’ during which the designated persons may trade in the company’s securities after securing pre-clearance from the compliance officer in accordance with these rules.
- B) designated persons shall not trade in the company’s securities when the trading window is closed.
- C) trading window shall remain closed from the end of last day of each quarter, until two days after declaration of financial results for the quarter concerned..
- D) additionally, the trading window shall be closed in particular for a designated person or class of designated persons when the compliance officer determines that a designated person or class of designated persons can reasonably be expected to have possession of upsi, for such periods as determined by the compliance officer.
- E) the trading window may be re-opened after closure, not earlier than 48 hours after the upsi in question becomes generally available.
5.Pre-clearance of trading
- A. Designated persons may trade in the securities of the company when the trading window is open, after obtaining approval of the compliance officer by submitting an application and an undertaking.
- B. The compliance officer shall not approve any proposed trade by designated person if the compliance officer determines that such designated person is in possession of upsi even though the trading window is open.
- C. The compliance officer may, after being satisfied that the application and undertaking are true and accurate, approve trading by a designated person, on the condition that the trade so approved shall be executed within seven trading days following the date of approval.
- D. The designated person shall, within two days of the execution of the trade, submit the details of such trade to the compliance officer. In case the transaction is not undertaken, a report to that effect shall be filed.
- E. If the pre-cleared trade is not executed within seven trading days after the approval is given, the designated person must secure pre-clearance of the transaction again.
- F. A designated person who trades in securities without complying with the preclearance procedure as envisaged in these rules or gives false undertakings and/or makes misrepresentations in the undertakings executed by him/her while complying with the preclearance procedure shall be subjected to the penalties as envisaged in these rules.
- G. Nothing in this rule shall apply to any transaction if the value of the securities traded, whether in one transaction or a series of transactions over any calendar quarter, aggregates to a traded value less than Rs. Ten lakh ( a “de minimis trade”) provided the designated person is not in possession of upsi while executing the de minimis trade.
6.Additional trading restrictions on designated persons
- A. No director or key managerial personnel shall enter into derivative transactions in respect of the securities of the company.
- B. All designated persons who trade in the securities of the company shall not enter into an opposite transaction during the next six months following the prior transaction. In case of any contra trade be executed, inadvertently or otherwise, in violation of such a restriction, the profits from such trade shall be liable to be disgorged for remittance to the SEBI for credit to the investor protection and education fund administered by SEBI.
- An insider/designated person shall be entitled to formulate a trading plan that complies with the SEBI regulations (a “trading plan”) and present it to the compliance officer for approval and public disclosure pursuant to which trades may be carried out in his behalf in accordance with such plan.
- An insider/designated person shall either set out the value of trade to be effected or the number of securities to be traded along with the nature of the trade and the intervals at or dates on which such trades shall be affected.
- An insider/designated person shall not use trading plans for trading in securities for market abuse.
- The compliance officer shall review and approve the trading plan if it complies with the SEBI regulations and shall disclose the trading plan to the stock exchanges.
- The trading plan once approved shall be irrevocable and the insider/designated person shall mandatorily have to implement the plan, without being entitled to either deviate from it or to execute any trade in the securities outside the scope of the trading plan.
- However, the implementation of the trading plan shall not be commenced, if at the time of formulation of the plan, the insider/ designated person is in possession of upsi and the said information has not become generally available at the time of the commencement of implementation. The commencement of the trading plan shall be deferred until such upsi becomes generally available information.
- Further, the insider/designated person shall also not be allowed to trade in securities of the company, if the date of trading in securities of the company, as per the approved trading plan, coincides with the date of closure of trading window announced by the compliance officer.
- Note : insider/designated person shall not form a trading plan when another trading plan is already in use.
8.Penalty for insider trading
- As per the Section 15(g) and 24 of the SEBI act, insider, who violate the 2015 regulations, are liable to a penalty that may be imposed by SEBI of Rs. 25 crores or 3 times the amount of profit made out of the insider trading, whichever is higher and shall also punishable with imprisonment for a term extending to 10 years or a fine up to 25 crores or both.
- As per section 11(c) (6) of the SEBI act, if any person without justifiable reason, refuse to co-operate in any investigation by SEBI with respect to insider trading, then he shall be punishable with an imprisonment for a term extending up to one year, or with fine up to Rs. 1 crore or with both, and also with further fine up to rs. 5 lakh for every day of such non co-operation.
- As per section 11(4) (b) of SEBI act, SEBI is also empowered to pass directions to such insider not to deal in the concerned securities in any particular manner and/or prohibit him from disposing of the concerned securities and /or declaring the concerned transaction(s) of securities as null and void, restraining the insider from communicating or counselling any person to deal in securities.
- As per section 195 of the companies act, 2013 any insider contravenes the provisions of this section, he/she shall be punishable with imprisonment for a term which may extend to five years or with fine which shall not be less than five lakhs rupees but which may extend to twenty five crore rupees or three time the amount of profits made out of insider trading, whichever is higher, or with both.
- A.Initial disclosure :
- I. Every promoter, key managerial personnel, director of the company shall disclose his holding of securities of the company within thirty days of these rules taking effect.
- II. Every person on appointment as a key managerial personnel or a director of the company or upon becoming a promoter shall disclose his / her holding of securities of the company as on the date of appointment or becoming a promoter, to the company within seven days of such appointment or becoming a promoter.
- B. Continual disclosure:
- Every promoter, employee, director of the company shall disclose to the company the number of such securities acquired or disposed of within two trading days of such transaction if the value of the securities traded, whether in one transaction or a series of transactions over any calendar quarter, aggregates to a traded value in excess of Rs.Ten lakh.
- The disclosure shall be made within two working days of:
- The receipt of intimation of allotment of shares, or
- The acquisition or sale of shares or voting rights, as the case may be.
- Disclosure to the stock exchange:
- The compliance officer shall notify the stock exchanges, particulars of the trades, within two trading days of the receipt of the continual disclosure or from becoming aware of such information.
- Disclosures by other connected persons :
- The compliance officer may, require any other connected person to disclose the holdings and trading in securities of the company in such form and at such frequency as he may determine.
- A. The board of directors shall be empowered to amend, modify, interpret these rules and such rules shall be effective from such date that the board may notify in this behalf.
- B. The compliance officer shall provide the audit committee of the board, on a quarterly basis, all the details of trading in securities by the designated persons including any violations of the rules.
- C. The compliance officer shall maintain :
- Updated list of designated persons,
- Records of disclosures, the details of trading plans received and pre-clearance applications received and pre-clearance given and undertakings for a period of five years and
- A confidential list of any ‘restricted securities’ which includes equity shares or any other securities convertible into equity shares of the company to which the compliance officer may require designated persons to seek pre-clearance before trading in such ‘restricted securities’.
- Assist all the persons in addressing any clarification regarding this code and the regulations.
- D. The company shall require all connected persons to formulate and adhere to a code of conduct to achieve compliance with these rules. In case such persons observe that there has been a violation of these rules, then they shall inform the board of directors / compliance officer of the company promptly.