CS Garima GoyalIntroduction of Structured Digital Database (SDD) were made to put in place a framework for prohibition of insider trading in securities and to strengthen the legal framework to cater to changing dynamics of the market. SEBI, vide the SEBI (Prohibition of Insider Trading) (Amendment) Regulations, 2018, introduced the concept of Structured Digital Database (hereinafter referred to as “SDD” or the “Database”) which came into effect from April 01, 2019.

Insight for introduction of the SDD provision:

  • The concept of SDD was introduced keeping in mind that as when the information starts taking shape of a price-sensitive information i.e. UPSI and such information is likely to “materially” affect the prices of the securities of the company when published, sharing of such information shall be recorded in the Database to maintain the integrity of information.
  • The intent of maintaining SDD is that the flow of sharing of UPSI is recorded.

Who should be responsible for maintenance of SDD?

Regulation 3(5) and 3(6) of PIT Regulations, 2015 mandates that the Board of Directors or the head(s) of the organization who are in charge of unpublished price sensitive information are to be responsible for maintenance of SDD(database) as per requirements of the PIT Regulations, 2015

As per FAQ’s (https://www.sebi.gov.in/enforcement/clarifications-on-insider-trading/apr-2021/comprehensive-faqs-on-sebi-pit-regulations-2015_49999.html) provided by SEBI in 2021, important aspect of the SDD is:

  • UPSI should be available to a person only on ‘need to know’ basis.
  • Further, the identity of the person accessing the database(SDD) is required to be established for the purpose of audit trail.

Obligation of Listed Entities under the SDD concept:

With reference to Regulation 3(5) and 3(6) of SEBI (PIT) Regulations, 2015 which required SDD to be maintained by the company, in this regard, companies are required to submit a quarterly compliance certificate certified either by the compliance officer or a Practicing Company Secretary (PCS), as a Standard Operating Process under SEBI (PIT) Regulations.

For adherence to same, BSE issued a notice vide no. 20221028-15 and NSE issued a circular vide Ref No: NSE/CML/2022/51 for creating awareness about the submit of compliance certificate with all listed companies on board with both exchanges.

  1. The companies are required to submit compliance certificate as per the below schedule:
    1. For quarter ended September 2022 – Latest by November 18, 2022
    2. For quarter ended December 2022 – Latest by January 21, 2023
  2. Paths for filling of Compliance certificate:
    1. On BSE –
      BSE Listing Centre > Listing Compliance > Compliance Module > Structured Digital Database (SDD) Compliance Certificate
    2. On NSE –
      certificate has to be emailed on the following email id of the Exchange: sdd_pit@nse.co.in
  3. Points to be noted in regard:
    1. Attached Annexure A contains format for the compliance certificate to be filed.
    2. A separate circular shall be issued by the Exchanges for handling of compliance certificate for quarter ending March 2023 onwards.
    3. Exchanges shall inspect the SDD system maintained by the company after providing 1 working day notice, on inspection if the Exchanges observe that the company is non-compliant with respect to SDD, appropriate action shall be initiated by the Exchanges.

Key points while maintaining SDD:

  1. SDD shall also be maintained by the intermediary/ fiduciary / entity for unlisted companies for which securities are proposed to be listed, not only by already existing listed companies.
  2. Sharing of an unpublished price sensitive information internally or externally is the trigger for recording the same in the SDD.
  3. Irrespective of whether an UPSI is shared internally or externally, necessary recording should be made in SDD
  4. The Database shall not be outsourced and shall be maintained with adequate internal controls and checks such as time stamping and audit trails to ensure non-tampering of the database.Entries once made in SDD, cannot be altered or modified and should be non-tampered. If any entry made needs to be altered, then a separate entry can be made citing reference to the earlier one with full corrected details and the reasons for correction.
  5. Such database should be maintained for not less than 8 years after completion of the relevant transactions.
    In the event of receipt of any information from the Board regarding any investigation or enforcement proceedings, the relevant information in the structured digital database shall be preserved till the completion of such proceedings
  6. Name of persons who have shared the information (UPSI) and with whom information (UPSI)
    is shared shall be captured digitally in database along with PAN or any other identifier.

Related Circular: – Click Here

Disclaimer: This is an effort by Lexcomply.com to contribute towards improving compliance management regime. User is advised not to construe this service as legal opinion and is advisable to take a view of subject experts.

 

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