Trading plans, which have received a muted response from Corporate India so far, are set for a makeover, with the Securities and Exchange Board of India proposing a number of tweaks in its consultation paper on Friday.

The regulator has proposed a reduction in the minimum cool-off period between the disclosure of trading plans and their implementation to four months from the existing six. The minimum coverage period may be reduced to two months from twelve at present. The requirement of a black-out period for trading — a period of time when executives and employees are prohibited from buying or selling shares in their company — may be done away with.

Flexibility for insider

The insider may have the flexibility to provide price limits within +/-20 per cent of the closing price on the date of submission of the TP. If the price of the security, during execution, is outside the price limit set by the insider, the trade shall not be executed. Contra-trade restrictions apply to TP trades. The disclosure timeline shortens to two days, and a standardised reporting format is recommended for consistency.

Insiders may be given the option to mask personal details while disclosing the TP to stock exchanges to protect privacy. Two separate disclosures of TP may be allowed: a full (confidential) disclosure to stock exchanges and a public disclosure without personal details.

“These adjustments cater to individuals with short-term financial objectives who couldn’t fully benefit from existing norms. The concept paper suggests granting perpetual insiders more flexibility in determining the duration of their trading plans, moving away from the rigid 12-month requirement, and aligning better with diverse financial needs and market dynamics,” said Sumit Agrawal, founder of Regstreet Law Advisors and former SEBI Officer.

‘Right direction’

The recommendation to reduce the cool-off period from six to four months is a move in the right direction since it is unlikely that any price-sensitive information for a listed entity remains unpublished for a long period of six months, said Rajiv Sharma, Partner, Singhania & Co.

“The recommendation to abolish the black-out period is not healthy, as unpublished price-sensitive information at the end of each quarter is vital, and mere approval of the trading plan by the compliance officer and its notification on the exchange does not make it any less vulnerable for the public at large to be adversely affected by planned insider trading,” said Sharma.

Makarand M Joshi, founder of MMJC & Associates, said the proposals will help CXOs unlock wealth and participate in the ESOP scheme of companies, which is currently cumbersome.