New Enroll in RBI Grade B New Batch - Starts on May 21

    Question

    Under what circumstances can insiders communicate

    unpublished price-sensitive information as per Reg 3 of SEBI (Prohibition  of  Insider  Trading) Regulations, 2015?
    A When it is required for legitimate purposes, performance of duties, or discharge of legal obligations. Correct Answer Incorrect Answer
    B Only when they have obtained prior permission from the regulatory authorities. Correct Answer Incorrect Answer
    C When it is necessary for personal gain or benefit. Correct Answer Incorrect Answer
    D Only when the information has already been made public Correct Answer Incorrect Answer
    E All of the above Correct Answer Incorrect Answer

    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    As per Reg 3- Communication or procurement of unpublished price sensitive information. (1)No insider shall communicate, provide, or allow access to any unpublished price sensitive information, relating to a company or securities listed or proposed to be listed, to any person including other insiders except where such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 NOTE:This provision is intended to cast an obligation on all insiders who are essentially persons in possession of unpublished price sensitive information to handle such information with care and to deal with the information with them when transacting their business strictly on a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 (2)No person shall procure from or cause the communication by any insider of unpublished price sensitive information, relating to a company or securities listed or proposed to be listed, except in furtherance of legitimate purposes, performance of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 NOTE:This provision is intended to impose a prohibition on unlawfully procuring possession of unpublished price sensitive information. Inducement and procurement of unpublished price sensitive information not in furtherance of one’s legitimate duties and discharge of obligations would be illegal under this provision.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.

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