During this time, the mantra is “refrain or face a report”. Accidental leakage of any unpublished price sensitive information can put the company on the wrong side of the law. The company executives, key managerial personnel, and designated employees need to observe extreme caution while speaking in public or private events. This includes discussion on financial performance, earnings expectations, hiring plans, changes to board or key managerial personnel, investment plans, among others. During this time, all connected persons and those privy to company information are prohibited from trading in the securities of the company and no qualitative or quantitative information can be revealed. This is also known as the trading window closure period (or blackout period). For instance, a listed company is required to observe a silent period from the end of the quarter to 48 hours after the declaration of quarterly financial results. This leads to an addition of over 200 new compliances on a monthly, quarterly and annual basis. These include SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, SEBI (Prohibition of Insider Trading) Regulations, 2015 and various other circulars issued by SEBI, NSE and BSE. To instill confidence, trust and integrity in the securities market, SEBI has taken various initiatives to ensure fair market conduct and promulgated all listed companies to comply with several regulations in addition to the Companies Act, 2013 and related rules. This list works in retrospect too, going back six months to establish any linkage of a connected person with a public company. Be that as it may, it is important to understand that underneath the shiny facade of an IPO lies a massive shift in statutory obligations, reporting requirements, and responsibilities of the connected persons including founders, promotors, key managerial personnel, designated employees and their family members the list can easily be in several hundreds, if not thousands. This frenzy is expected to sustain in 2022.
2021 was a bumper year for IPOs, with 63 companies raising Rs 1.2 lakh crore, the highest ever raised in a single year. Going public via an Initial Public Offering (IPO) is a matter of great pride for entrepreneurs as they become esteemed members of an exclusive club of publicly traded companies. This accidental disclosure was treated as unpublished price sensitive information under SEBI Act, 1992 and invited a show cause notice, hefty financial penalty and an embarrassing corporate governance event. While it made for a casual conversation, it had serious unintended consequences as Karan worked for a publicly listed company. In response, Karan revealed that he has been swamped at work since he is busy working through the details of an upcoming time-sensitive dividend declaration. So when he finally made it to the course on the next weekend, everyone was curious to learn about his whereabouts.
For Karan, it was an unusually busy week at work, forcing him to skip a key weekend game in the local golf league.
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