Insider trading norms not applicable on ESOP transactions: Sebi

MUMBAI: Providing more clarity, Sebi today said sale and purchase of shares under Employee Stock Options Programme (ESOP) will not be considered as 'trading' but companies need to comply with disclosure norms in this regard.

Sebi's decision would provide a major succour for corporates, who have been seeking clarity on whether trading regulations would be applicable on exercise of ESOPs in the wake of stringent insider trading norms coming into force.

During its meeting here today, Sebi's board discussed the issues and considered a guidance note related to insider trading norms.

The board was apprised about the representations received from industry bodies, law firms and others on the issue.

Now, it has been clarified that exercise of ESOPs is not considered as 'trading' for the purpose of regulations, except provisions relating to disclosures.

"This will remove the difficulties of the designated persons with regard to exercise of ESOPs and the sale of shares so acquired," Sebi said in a release issued after the board meeting.

Besides, Sebi's board has approved various amendments to the Share Based Employee Benefits (SBEB) regulations.

Listed companies having employee benefit trusts would have to re-classify the shareholding of the trusts into 'non-promoter and non-public' category.

Such trusts would now be required to comply with minimum public shareholding norms within three years from the date of notification of SBEB regulations. Earlier, these entities had five years time for compliance.

After taking into account representations made by market participants, Sebi has decided to increase the time period for exercise of voting rights by employee benefit trusts from one year to three years.

"Employees of 'associate company' shall not be eligible as beneficiaries of the employee benefit schemes framed under the SBEB Regulations," the release said. This is in line the amendments to the Companies (Share Capital and Debentures) Rules, 2014, made under the Companies Act.

In addition, these trusts would be allowed to offer shares - under the tender offer route -- through the stock exchange platform, without any requirement of minimum holding period. This follows recent amendments made to Sebi regulations on takeover, buy-back and delisting.

The changes to SBEB norms are being made to align the norms with the new rule under the Securities Contracts (Regulation) Rules, 1957, formulated by the government.