Question
As per Reg 3 of SEBI (Prohibition of Insider
Trading) Regulations, 2015, what is the purpose of the provision regarding "legitimate purposes"?Solution
As per Reg 3- Communication or procurement of unpublished price sensitive information. (1)No insider shall communicate, provide, or allow access to any unpublished price sensitive information, relating to a company or securities listed or proposed to be listed, to any person including other insiders except where such communication is in furtherance of legitimate purposes, performance of duties or discharge of legal obligations. NOTE:This provision is intended to cast an obligation on all insiders who are essentially persons in possession of unpublished price sensitive information to handle such information with care and to deal with the information with them when transacting their business strictly on a need-to-know basis. It is also intended to lead to organizations developing practices based on need-to-know principles for treatment of information in their possession. (2)No person shall procure from or cause the communication by any insider of unpublished price sensitive information, relating to a company or securities listed or proposed to be listed, except in furtherance of legitimate purposes, performance of duties or discharge of legal obligations. NOTE:This provision is intended to impose a prohibition on unlawfully procuring possession of unpublished price sensitive information. Inducement and procurement of unpublished price sensitive information not in furtherance of one’s legitimate duties and discharge of obligations would be illegal under this provision. [(2A) The board of directors of a listed company shall make a policy for determination of “legitimate purposes” as a part of “Codes of Fair Disclosure and Conduct” formulated under regulation 8.Explanation –For the purpose of illustration, the term “legitimate purpose” shall include sharing of unpublished price sensitive information in the ordinary course of business by an insider with partners, collaborators, lenders, customers, suppliers, merchant bankers, legal advisors, auditors, insolvency professionals or other advisors or consultants, provided that such sharing has not been carried out to evade or circumvent the prohibitions of these regulations.] [(2B) Any person in receipt of unpublished price sensitive information pursuant to a “legitimate purpose” shall be considered an “insider” for purposes of these regulations and due notice shall be given to such persons to maintain confidentiality of such unpublished price sensitive information in compliance with these regulations.
Which of the following term is a strategy that tries to limit risks in financial assets?
Premium amount of and minimum age of entry in PM Suraksham Bima Yojna?
The entity willing to act as a Qualified Supplied-Limited Purpose Trading Member (QS-LPTM) on a Bullion Exchange shall be required to have net worth of ...
Calculate NNPfc from GNPmp = 5069, Consumption of fixed capital = 626, indirect tax = 475, subsidies = 49
Which of the following is an example of a project finance structure?
The Government Scheme facilitates bank loans between Rs.10 lakh and Rs.1 crore to at least one Scheduled Caste/ Scheduled Tribe borrower and at least on...
FIFP is the new online single point interface of the Government of India for investors to facilitate Foreign Direct Investment, what is the full form of...
Payment Banks in India are prohibited from performing which of the following activities?
The country’s retail inflation had crept above the RBI’s tolerance range in January 2022. It remained above the target range for ten months before r...
_________ is partial or complete disposal by sale, swap, close or bankruptcy of a business entity.