Trading Window Closure becomes mandatory for all listed entities

The Securities Exchange Board of India vide Circular SEBI/HO/ISD/ISD-SEC-4/P/CIR/2022/107 dated August 05, 2022 ['Circular'] had proposed a framework for restricting trading by DPs by freezing Permanent Account Number at security level during the Trading Window Closure period making it applicable on listed companies that are a part of Nifty 50 or Sensex 30 commencing from declaration of financial results for quarter ending September 30, 2022.

Stock Exchanges have vide its circular dt: June 28, 2023 extended applicability of Circular to all listed entities in a phased manner. Provisions of August 2022 Circular would be applicable mutatis mutandis. Extension in phased manner would be as follows:

As per this Circular with effect from April 1, 2024 all listed entities are mandatorily required to freeze PAN of DP at security level on DD's portal. Stock Exchange has further guided that procedure for this would be on same extent as given by SEBI vide Circular. 

Important points relating to procedure as provided by SEBI in its Circular

• From where are listed companies expected to start? Designated Depository ("DD") appointed by the listed company pursuant to the SEBI Circular No. SEBI/HO/CFD/DCR1/CIR/P/2018/85 dated May 28, 2018 shall enable access to the respective listed company on the portal/ platform.
• Upon login, DD shall auto-populate PAN and name of the DPs and their demat account number / DP ID and client ID (only in case of PAN exempt cases) as per the last updated or available information under system-driven disclosure uploaded by the listed company with DD in terms of SEBI Circular No. SEBI/HO/ISD/ISD/CIR/P/2020/168 dated September 09, 2020.
• The listed company shall confirm to the DD details with respect to listed ISIN of equity share of the company, Name, PAN, and confirm the demat account number viz. DP ID and client ID (in case of PAN exempted cases) of DPs. In the event any updation is required to the aforementioned details, the listed company shall take necessary steps as per para 10 below.
• DD shall provide a facility to the listed company to specify the 'Trading Window Closure Period' i.e., 'Commencement Date' and 'End Date' on portal/platform. 4.1. With respect to financial results, the listed company shall specify the 1st day (T- day) immediately after the end of every quarter for which results are to be announced as 'Trading Window Closure commencement date' and the date on which 48 hours ends post disclosure of financial results as 'Trading Window Closure End date' in the portal/platform
• The listed company shall provide the aforesaid details atleast 2 trading days prior to the commencement of trading window closure date (T-2 days). For example, for financial results for the quarter ending September 30, 2022, the listed company shall confirm the details by September 29, 2022.
• How will Designated Depository freeze the trading? DD shall provide the details received from the listed company (i.e. Commencement Date and End Date of the trading window closure period, Name and PAN of DPs, ISIN, etc.) to the Stock Exchanges and other Depository atleast 1 trading day prior to the commencement of trading window closure commencement date (T-1 day). For example, for financial results for the quarter ending September 30, 2022, the DD shall provide the details by September 30, 2022. Further, during the trading window closure period, DD shall also provide the aforesaid details and changes therein, if any, to the Stock Exchanges and other Depository on a daily basis.
• The demat accounts shall be identified by the depositories based on the PAN of the DP of Sole / joint holder.
• Based on demat accounts identified as per para 7 above and instruction given by listed company as per paras 3 and 4 above, the off-market transactions and creation of pledge shall be restricted by the Depositories with reason code as "Trading Window Closure Period".
• On the basis of data received from the Depositories, the Stock Exchanges shall restrict the on-market transactions of DPs in equity shares and equity derivatives contracts of the listed company from T day i.e. Commencement Date of trading window closure period. As per the example mentioned above, Commencement Date of trading window closure period shall be October 01, 2022, for the quarter ending September 30, 2022.
• What is the procedure for addition or deletion of PAN? In case of any addition/deletion/updation pertaining to the details of DP, the listed company has to follow the procedure specified in terms of SEBI Circular No. SEBI/HO/ISD/ISD/CIR/P/2020/168 dated September 09, 2020 and shall be required to separately provide the details as mentioned at paras 3 and 4 above. Such instances shall be effected within 2 trading days of receipt of intimation from the listed company. For example, assuming the trading window closure period is October 01 - 15, 2022 and if the listed company adds any DP on October 10, 2022, then the change i.e. freeze shall be effected on or before October 12, 2022.
• What if there is emergency and DP wants to trade? There shall be provision in the system to specify the details of DP to be exempted by listed company from Trading Window restriction in terms of Clause 4 (3) of Schedule B read with regulation 9 of PIT Regulations. In such cases, the restriction shall be removed within 2 trading days from the date of receipt of request from the listed company. As per the example given at para 10 above, if the listed company provides exemption to any DP on October 11, 2022, then the change i.e. de-freeze shall be effected on or before October 13, 2022. The restrictions shall be re-introduced automatically post lapse of the exemption period or completion of the transaction by the DP.
• When will freezing start? The freezing/de-freezing of PAN at the security level on account of changes due to addition or deletion will be effected post market hours.
• Settling of earlier transactions: Pay-in and pay-out obligations in respect of transactions, if any, taken place prior to freezing the PAN of DP at the security level, may be permitted to be settled, squared off or closed out, as the case may be.