In case a designated person is taking financial assistance for acquiring the ESOP
Shares, do Form C is required to be filed?
The disclosures are required on receipt of shares pursuant to exercise of ESOPs.
Showing posts with label FAQs. Show all posts
Showing posts with label FAQs. Show all posts
ESOP Disclosures in FORM C
What must be the value that the designated person should mention while reporting trades to the Company?
What must be the value that the designated person should mention while reporting
trades to the Company? Should it be the market rate or should it be by subtracting
Brokerage, Commission etc. i.e.net of taxes and all transaction charges?
For the purpose of reporting trades, market rate should be considered.
Disclosures in Form C with regard to trades Exceeding 10 Lacs.
In case of trades exceeding Rs. 10 Lacs in a quarter, any subsequent trades need to be
disclosed in Form C or should the next disclosure be only when the next Rs. 10 Lacs
limit is breached?
The explanation to Regulation 7(2)(b) states that the disclosure of the incremental transactions
after any disclosure under this sub-regulation shall be made when the transactions effected
after the prior disclosure cross the threshold specified in clause (a) of sub-regulation (2).
Hence, the next disclosure will be due when the next Rs. 10 lacs limit is breached.
In case a designated person is a foreign national/individual who do not possess PAN or a demat account number, whether system driven disclosures are required to be submitted?
If a designated person does not have PAN or a demat account number, then such a person
cannot trade in the Indian securities market. Hence, system driven disclosures will not trigger
for such a person
the designated person is in possession of an UPSI which was not existing at the time of formulation/submission of trading plan, would these trades be in violation of SEBI (PIT) Regulations?
If an insider/designated person trades on the basis of earlier UPSI, which is still not generally
available, then it will be in violation of SEBI (PIT) Regulations. However, if at the time of
formulation of trading plan, there was no UPSI or later on a new UPSI was generated, then
the trading can be carried out as per the trading plan, even if the new UPSI has not been made
generally available
What should be the value of the pledge / revoke transaction for the purpose of disclosure?
For the purpose of calculation of threshold for disclosures relating to pledge under Chapter III
of the SEBI Regulations, the market value on the date of pledge/revoke transaction should be considered. In the above illustration, the value of transaction would be considered as fifteen
lakh rupees.
Whether creation of pledge, revocation of pledge5 or invocation of pledge is allowed when trading window is closed?
Yes. However, the pledgor or pledgee may demonstrate that the creation/revocation5 of pledge
or invocation of pledge was bona fide and prove their innocence under proviso to sub-
regulation (1) of regulation 4 of the Regulations.
For how long the Company needs to maintain the data in its structured digital database?
As per Regulation 3(6) of SEBI (PIT) Regulations, the structured digital database shall be
preserved for a period of not less than eight years after completion of the relevant transactions
and in the event of receipt of any information from SEBI regarding any investigation or
enforcement proceedings, the relevant information in the structured digital database shall be
preserved till the completion of such proceeding
Nominee directors of a bank or financial institution sharing information to their bank or financial institution for legitimate purpose, will it be covered as communication of UPSI?
The nominee directors on an entity, falling under the list of designated persons or as an
insider, sharing UPSI with the Bank/FIs, for the legitimate purpose of the entity, would be considered as communication of UPSI. Accordingly, the same would need to be recorded in
the SDD of the company
If the directors fall under the list of designated persons or as an insider, then sharing of UPSI by them for legitimate purpose with the Bank/FIs, would be considered as communication of UPSI. Accordingly, the same would be recorded in the SDD of the company
Are companies required to maintain this structured digital database even when the information is shared only within the company?
Yes, irrespective of the fact that information is shared within or outside the Company, requisite
records shall be updated in structured digital database as and when the information gets
transmitted.
Does list of UPSI as prepared by the company in-house needs to be disseminated to public at large?
No, there is no requirement to disseminate the list of UPSI on the website of the company
Whether a listed company can use software provided by third party vendors, wherein the server is of the vendor but requisite entries are made by the employees of the company only
Regulation 3(5) requires structured digital database shall not be outsourced and shall
be maintained internally with adequate internal controls and checks. Whether a listed company can use software provided by third party vendors, wherein the server is of the
vendor but requisite entries are made by the employees of the company only?
The third party vendors are providing the services/software on login basis, where the server
is maintained by the vendor. Therefore, the vendor may have access to such records which
would be contrary to the regulations with respect to maintenance of structured digital
database
If the structured digital database is maintained on Amazon, Google or cloud server hosted outside India, will it be considered as outsourced or internal?
The SDD has to be maintained in compliance of Regulation 3 (5) and 3(6) of PIT regulations.
The Board is solely accountable for all aspects related to the maintenance of data on cloud or
any other method. The Board and the compliance officer has to ensure the confidentiality,
integrity and security of its data and logs, and ensure compliance with the laws, regulations,
circulars, FAQ’s etc. issued by SEBI/ Exchanges from time to time. The Board / Compliance
Officer shall be responsible and accountable for any violation of the same
What information should a listed company maintain in its structured digital database under Regulation 3(5), in case the designated person is a fiduciary or intermediary?
The listed company should maintain structured digital database internally, which shall
contain information including the following:
(i). Details of the Unpublished Price Sensitive Information (UPSI);
(ii). Details of persons with whom such UPSI is shared (along with their PANs/other unique
identifier) and details of persons who have shared the information.
Similarly, another structured digital database should be maintained internally by fiduciary or
intermediary, capturing information as mentioned above at point (i) and (ii), in accordance with
Regulation 9A (2)(d) and as required under Schedule C.
For example: The listed company (X) has appointed a Law firm or Merchant Banker (Y) in
respect of fund raising activity and (A) from listed company has shared the said UPSI with (B)
of Law firm or Merchant Banker. The structured digital database of (X) should capture the
nature of UPSI shared, details of (A), (Y) and (B), along with their PAN or other unique identifier (in case PAN is not available). The Law firm or the Merchant Banker (Y) shall in turn maintain another structured digital database internally capturing the nature of UPSI received/shared, details of (X), (A) and (B) along with their PAN or other unique identifier (in case PAN is not available), in accordance with Regulation 9A(2)(d) and as required under Schedule C
The listed company should maintain the names of the fiduciary or intermediary with whom they have shared information along with the Permanent Account Number (PAN) or other unique identifier authorized by law, in case PAN is not available. The fiduciary/ intermediary, shall at their end, be required to maintain details as required under the Schedule C in respect of persons having access to UPSI. For example: If the listed company has appointed a law firm or Merchant Banker in respect of fund raising activity, it should obtain the name of the entity, so appointed, along with the PAN or other identifier, in case PAN is not available. The law firm or the Merchant Banker would in turn maintain its list of persons along with PAN or other unique identifier (in case PAN is not available), in accordance with Regulation 9A(2)(d) and as required under Schedule C, with whom they have shared the unpublished price sensitive information
Whether the requirement to maintain structured digital database under Regulation 3(5) is applicable on intermediaries and fiduciaries?
The requirement to maintain structured digital database under Regulation 3(5) of Insider trading Regulations, containing the names of such persons or entities with whom UPSI is shared, is applicable to listed companies, and intermediaries and fiduciaries who handle UPSI of a listed company in the course of business operations
Are PIT Regulations applicable on transmission of shares?
Yes, PIT Regulations are applicable on transmission of shares. However, they are exempted
from provisions of trading window closure, pre-clearance and contra trade, but the norms
relating to disclosure requirements shall be applicable on transmission of Shares.
Whether trading on the basis of UPSI is prohibited even for persons not falling under the definition of ‘Designated Persons’ under the PIT Regulations?
Regulation 2(1) (g) of SEBI (PIT) Regulations, 2015 defines ‘insider’ as any person who is:
i) a connected person; or
ii) in possession of or having access to unpublished price sensitive information.
Therefore, even if a person is not classified as a designated person, having access to UPSI
would make such a person an ‘insider’. As per Regulation 4(1) of SEBI (PIT) Regulations,
2015, an insider is prohibited to trade while in possession of UPSI.
Whether trading only in equity shares is in violation of PIT Regulations while in possession of UPSI or it also includes trading in other form of securities?
Trading in securities while in possession of UPSI is prohibited as per the regulations. For the
applicability of SEBI (PIT) Regulations, securities shall have the same meaning assigned to it
under the Securities Contracts (Regulation) Act, 1956, which inter-alia covers shares, scrips,
stocks, bonds, debentures, derivative, etc. except units of mutual funds.
Whether creation of pledge, invocation of pledge and revocation of pledge can be deemed as trading?
Trading as defined under Regulation 2 (1) (l) means and includes subscribing, buying, selling,
dealing, or agreeing to subscribe, buy, sell, deal in any securities, and "trade" shall be construed accordingly. The term trading is widely defined to include dealing in securities and intended to curb the activities based on unpublished price sensitive information (UPSI) which are strictly not buying, selling or subscribing, such as pledging etc. Hence, trading would include Creation/invocation/revocation of pledge.
