Compliance Management and Governance Software Applications

The Securities and Exchange Board of India (Prevention of Insider Trading) Regulations 2015 (SEBI Regulations), as amended from time to time, provide indicative guidance. However, simply put, any information transmitted over any channel or media that is not yet made public and has the potential to impact the share price of listed securities must be treated as UPSI. All identified UPSI can be quickly and easily entered into Affinis(SDD).

Trading of Shares of a Listed Company using UPSI is strongly prohibited and holds numerous fines and penalties including imprisonment. All flow of UPSI must therefore be logged into a Structured Digital Database like Affinis(SDD).

From a regulatory perspective, it may be presumed that if you hold UPSI, your trade is motivated with awareness of UPSI. As such, it is important to log any flow of UPSI into Affinis(SDD) or take approvals for trading via Affinis(ETT).

SEBI has required entities that exchange UPSI to maintain multiple details for each instance of UPSI shared and received on a continuing basis in a ‘Structured Digital Database’ (SDD) like Affinis(SDD). These details include Senders and Recipient Name and Identification Details, Senders and Recipient’s Organizations and Identification Details, Date and Time of Sharing UPSI, the Listed Entity that the UPSI Pertains to and the Nature of UPSI.

Non-maintenance of SDD is considered a contravention of the Insider Trading Regulations, with complete rights to deal with any such contraventions retained by SEBI. Non-maintenance, incomplete maintenance, outsourcing, lack of time stamping, maintenance on alterable media, incomplete or delayed availability of required information etc all considered non-compliance. Affinis(SDD) is a system that would be considered fully compliant with all SEBI requirements.

The Securities and Exchange Board of India (Prevention of Insider Trading) Regulations 2015, as amended from time to time, requires that the structured digital database shall not be outsourced and shall be maintained internally with adequate internal controls and checks. In fact, even databases/ servers provided by third party vendors will be considered as outsourced whether within India or outside India. Thus, any Structured Digital Database maintained on, say, Amazon, Google or cloud servers, will be considered as outsourced and therefore prohibited as clarified by the Comprehensive FAQs on SEBI (PIT) Regulations, 2015. Affinis(SDD) is fully compliant with all SEBI requirements and only authorized people have access to it on your internal systems.

No. The obligation is to maintain the Nature of UPSI, not UPSI itself (the later may increase the risk rather than reducing it). A pdf of an email would have the actual UPSI while at the same time it would not be linked to PAN and Entity details of the individual. As such, no uploads are possible other than as provided for in compliance with the requirements. Affinis(SDD) is therefore designed to prevent this and promote secure, quick and easy data entry instead.

The UPSI data is required to be kept recorded by maintaining a structured digital database which provides time stamping and internal controls & checks, a critical one being non-tamperability. These features would not be viable in Microsoft Excel or any other regular spreadsheeting software given the lack of internal controls and checks, lack of audit trail and the high tamperability of data. One of the reasons Affinis(SDD) is considered compliant is because it provides secure audit trails, anti-tamperability and time-stamping.

In addition to all features of the Core variant, Prime has four major additional features for organizations with more complex needs – (1) Prime enables creation of multiple “Chinese Walls”, permitting different deal teams within the same entity to manage projects privately (Compliance Officer always has access to all information) (2) With Prime, one can seek and record approvals from supervisors for policy maintenance updates (3) Delegatees can seek and record approval from UPSI senders or receivers within Prime before committing entries (not applicable for UPSI entries recorded via email auto-capture) (4) Prime provides additional email notifications, reminders, data intelligence reports as well as UPSI ‘super-grouping’.

A Restricted List is typically refers to a list of stocks that are ineligible for trade, either themselves or via any other person or third party. It does not necessarily imply that they are risky or flawed in any way, but are nonetheless prohibited on account of Personal Account Dealing restrictions or Employee Personal Trading Compliance requirements. Affinis(ETT) enables maintenance of Grey and Restricted Lists logically and easily.

A Statement of Holding refers to a summary of all securities held by you in your Demat account as on a particular date. A request to submit the Statement of Holdings can be triggered by the Compliance Officer through Affinis(ETT). Designated Persons can independently login and submit these statements.

It typically refers to a relationship in which one person has significant financial dealings in their relationship with another, for example, when he/she is a recipient of any kind of payment (loan or gift) during a specified period immediately preceding and which amount is equivalent to at least a specied fraction of annual income. Relationships in which the payment is based on arm’s length transactions are typically excluded. Based on the rationale applied, Material Financial Relationships can be recorded in Affinis(IDD) by each employee along with rationale if needed.

Benpos or Beneficiary Position is a statement of securities held by a person (who is typically identified by the PAN), as on a particular date and is maintained by Depositories such as CDSL/NSDL independent of the company or the beneficiary. Such statements can be uploaded to Affinis(ETT) for independent verification. Exceptions can be managed or tracked from within Affinis(ETT) itself.

Designated Person(s) under the SEBI Prevention of Insider Trading Regulations is an inclusive definition. Illustratively, under the regulations, it includes various persons and roles such as promoters; directors; key managerial personnel; auditors; all employees and support staff of various departments such as Accounts, Finance, Legal, Internal audit, Information technology and Secretarial Department.
It also includes Key Managerial Personnel of the material subsidiary of the Company; Secretaries/EAs reporting to the Directors and the Key Managerial Personnel; all Departmental Heads of the Company as well as employees upto two levels below the Board of Directors of the Company.
In addition, other persons may be identified by the Compliance Officer as well. Affinis(IDD) assists in identifying the list of persons who may potentially qualify as Designated Persons to more logically and formally record and maintain the list. The list of Designated Persons is also used to manage Designated Person compliances. Affinis(IDD) maintains an evidentiary trail of notices of compliance obligations and provides reports as required.