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August 2015
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Decisions in SEBI’s Recent Board Meeting in respect of SEBI (Prohibition of Insider Trading) Regulations, 2015 and SEBI (Share Based Employee Benefits) Regulations, 2014
SEBI in its recently concluded Board Meeting on August 24, 2015 has issued much awaited clarification on exercise of Employee Stock Options (“ESOPs”) and applicability of contra-trade norms by way of issue of a Guidance Note on SEBI (Prohibition of Insider Trading) Regulations, 2015 (“PIT Regulations”) and also approved proposals to amend certain provisions in SEBI (Share Based Employee Benefits) Regulations, 2014 (“SBEB Regulations”) relating to employee benefit Trusts and coverage of employees of Associate Companies.

New PIT Regulations were notified repealing its counterpart Regulations of 1992 on January 15, 2015. The new PIT Regulations does not contain any provisions clarifying in respect of exercise of ESOPs and sale of Shares arising out of such exercise (“ESOP Shares”) unlike its repealed counterpart. Further, there was also no circular issued by SEBI hitherto under the new PIT Regulations clarifying position in respect of contra trade in respect of exercise of ESOPs and sale of ESOP Shares unlike its clarification issued on July 24, 2009. This vacuum called for clarification and the industry represented before SEBI and sought its guidance. Accordingly, SEBI came out with a Guidance Note clarifying position in respect of exercise and contra trade restrictions in respect of ESOPs among other things.

By way of this newsletter, we wish to highlight and analyze important aspects of this development from ESOP and Trust perspective that would expectedly help understanding and complying with the relevant provisions.
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