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Category: Securities Laws

US Decision Giving Relief to Satyam Directors – Implications for Independent Directors in India

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The recent US Court decision to give relief to Satyam independent directors/audit committee members has raised both – concerns and hopes. Concerns on corporate governance are indeed ineffective in practice and impossible to enforce, as has long been the suspicion. Hopes are that SEBI’s actions against independent directors and others in several recent cases, are perhaps unwarranted or probably even without legislative sanction.

Recently, the independent directors/audit committee members of Satyam Computers Limited were given relief in a class action suit filed against them in USA, for their alleged recklessness (it may be recollected that, as widely reported, in 2009, in settlement of class action claims, Satyam had paid INR7,797 million and the Auditors had paid INR1,591 million). Would the latest decision change SEBI’s approach ? Will independent directors in India be also treated with the same standards by SEBI or will they continue to be punished, as they have been punished in several recent cases, for alleged negligence, connivance, etc.?

First of all, what does the US decision say? It will be beyond the competence of this author to comment on what the scheme of provisions is in the US in this regard nor is it relevant significantly here. But a summary of some aspects apparent on the face of the decision can be made.

The decision is related to many issues, apart from the role of independent directors, such as whether the US courts had jurisdiction if shares of an Indian company was acquired on Indian stock exchanges. However, the relevant issue for discussion here is whether the independent directors (including audit committee members) could be held liable for loss caused to the investors.

The allegations in Satyam may be recollected. The company falsified its records and showed fictitious revenues, profits and assets. Further, it showed fictitious expenditure through which monies were channeled out in group companies. Loans from related parties were shown to have been taken in Satyam to compensate for the cash shortage. Such funds diverted were used in a related party – Maytas – to acquire huge amounts of immovable properties. Such fictitious amounts rose over the years and in a last ditch effort to cure the fraud, it sought to merge the related party into Satyam and show that the fictitious assets were used to acquire immovable properties and that too at an inflated price. Though this alleged fraud was carried out over several years, neither the independent directors, the Audit Committee members, nor the auditors detected or reported it. The question in the US decision was whether independent directors (including audit committee members) could be held liable for the fraud?

It needs to be noted that the US decision was not given on merits – that is — where the facts of the case were examined in great detail and decision given. The decision was on whether the class action could be dismissed on preliminary grounds that the facts, as alleged, were insufficient to determine reasonable scienter or state of mind/knowledge. The standards for this decision were simple. Are the facts – as merely alleged and not even proved – sufficient to reach the standards of scienter or a guilty state of mind, in terms of recklessness, connivance, etc.?

Thus, the plaintiffs were required to have alleged a certain level of facts which, assumed to be wholly true, should show a level of scienter/recklessness on the part of the independent directors. Several facts were alleged. That the fraud was so huge that it could not have escaped scrutiny of such competent people. That the auditors raised certain red flags in the form of certain internal control systems not being followed. That the independent directors approved the Maytas purchase without sufficient scrutiny. That though the auditors were paid huge amount for “other services”, the independent directors did not question this properly and grasp why the auditors were engaged for ‘other services’. That the norms of corporate governance in India required several things to be done by the independent directors/audit committee members who failed in performing. And so on.

The Court found that these alleged facts were not sufficient to establish scienter/recklessness. Hence, the class action was dismissed. More specifically, it was even observed that the independent directors were more likely the victims of a sophisticated fraud themselves rather than its perpetrators. The Court observed, “The majority of the allegations in the FACC concern an intricate and well-concealed fraud perpetrated by a very small group of insiders and only reinforce the inference that the AC Defendants were themselves victims of the fraud. The strength of this competing inference outweighs the inference of scienter asserted by lead plaintiffs.”

The Court dismissed the case, stating as follows:-

“Having considered the FACC in its entirety, the Court finds that lead plaintiffs have failed to plead sufficient facts to raise a strong inference of recklessness on the part of the AC Defendants that is at least as compelling as the non-fraudulent inference reasonably drawn from the allegations.”

There are some important points to note here. Firstly, this was a private action for damages, and not an action by a regulator against persons having certain statutory obligations. Secondly, certain actions were already taken against the company and its auditors and settlement for compensation was made. Arguably, the provisions of law and standards of proof required for fraud/negligence/recklessness, etc. are different in the US as compared to India, even though some of the obligations of the independent directors in the Satyam case were traced to Indian laws. Further, what are the obligations of persons under US law and how are they deemed to be contravened are also different. The specific allegations made in the class action is also to be seen in this context.

Nevertheless, it makes a difference that the actions/ omissions of the independent directors were held as not to constitute recklessness/scienter and it has some relevance in general times in India too. This is because, unless it is alleged and found that the independent directors did not comply with specific obligations under law, the issue before the Indian regulator would be similar – and that is, did the independent directors do their duties correctly? Interestingly, to the best of the author’s knowledge, there are no findings made as of today for any of such independent directors in the Satyam case. And it would be interesting to see whether what finding SEBI makes against the same independent directors who are given relief by the US Court.

However, it is also noteworthy for comparable or even lesser levels of manipulations in several cases, SEBI has taken stringent actions against independent directors, members of audit committee, CFOs, etc. For example, in several cases (Bharatiya Global Infomedia Limited, Pyramid Saimira, Tijaria Polypipes Limited, etc. as also discussed earlier in this column), independent directors and audit committee members (and even CFOs/CSs) have been strongly acted against by SEBI. The question that will be relevant is whether such actions were correct in context of the US decision. Or whether, in India, even the Satyam independent directors would be held liable.

On balance, this author submits that the US decision should be taken in its context and will result in change in India’s approach

Having said that, there are some basic wrong things that exist in the Indian framework for corporate governance. Firstly, and perhaps most importantly, they are contained in Clause 49 of the listing agreement, which is not a law, but an agreement. Moreover, it is an agreement between the stock exchange and the company. Of course, recently, violation of the listing agreement has been made punishable. However, still, it is a legally bad place to be for a provision that is meant to have such significance.

Secondly, while a significant level of obligations are laid down on independent directors in Clause 49, their rights are fairly marginal and difficult to enforce, particularly when one compares the powers of auditors under the Companies Act, 1956. Often, the only recourse left for an independent directors is to resign or otherwise report what he has already found to be objectionable.

Thirdly, this weak basis of law making causes problems even for SEBI. It really does not have any specific powers – as it has for various other ills – for taking action against errant companies, independent directors, etc. Thus, it uses its generic powers – which are meant to be used in exceptional cases – and debars them. While it is true that SEBI as an expert body needs certain wide and discretionary powers to take action in the face of newer and innovative types of market manipulations, corporate governance is fairly old now for resorting to such actions.

Finally, the scheme of law leaves the investors uncompensated. Whether it is Satyam, Pyramid or other cases, it was the investors who were left stranded with their shares devalued, as they assumed that SEBI had put in an effective system of corporate governance, where there are responsible persons to carry out the safeguards. The weak basis of law which, at best, punishes the independent directors by debarring them, does not help the investors recover their losses.

There is another dimension too. The general principles and even the concept of corporate governance are borrowed from the West where the management is with executives whose total holdings is usually in single digits. In comparison, in India, companies are promoter controlled, usually families and who often hold 35-50% and even more of the company. The concept of independent directors, etc. are relevant where shareholders holding 90% can appoint such people to safeguard their interests. While in India, if such concepts are blindly introduced for similar purposes, they would be – and indeed they are often – defeated by promoters, having full power to appoint people who are favourably disposed to them and the inherent power to remove them.

In the end, it seems that a transparent, effective, and comprehensive scheme of law governing corporate governance relevant to Indian realities, is needed. In this context, then, it is sad that neither the concept paper on corporate governance recently issued by SEBI nor the Companies Bill 2011 addresses these fundamental issues. The result then is likely to be a false sense of security, which would often be taken away by scams and which would be acted against by SEBI using its discretionary and arbitrary powers.

Relief for Shareholders Agreements – SEBI Notifies Long-overdue Relaxations

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SEBI finally resolves an age-old self-created problem SEBI has finally set at rest, substantially though not fully, a controversy that affected for decades some core issues in Shareholders Agreements and related agreements/structures. An age old provision in the form of a circular existed that was meant to prevent certain ills but ended up affecting innumerable agreements between two or more groups of shareholders and others. A brief introduction of the issue is first necessary to understand what the problem was and what SEBI has now provided.

What was the problem?

Take an example of a situation where such a provision created hurdles. When two or more groups get together in a company, to control and run it together, it is common and even inevitable that they will agree that one group will not exit without the other having a say. Thus, if Group A wants to sell its shares, Group B would want certain safeguards/rights. It would require Group A to give what is known was Right of First Refusal. This means that if Group A is getting an offer to acquire its shares at say, Rs. X per share, then Group B would have right to buy the shares at the same price. In other words, it has a right of pre-emption. Of course, Group B could choose not to buy and let the shares be sold to the offering party. At times, they may agree that on completion of certain conditions, one group (or a third party, say an executive) would have a right to acquire a certain number of shares. One could go on with more such examples but, in essence, rights are given over to one person to acquire another person’s shares in the future. Similar rights could be given to a person to sell its shares.

The law makers had a certain concern on an entirely unrelated issue. Considering the evils of unregulated trading in shares (including what is known as dabba trading in common parlance) it was decided that trading in securities otherwise than on regulated and recognized stock exchanges should not be permitted. Thus, trading – or even contracting to buy/sell – securities except on a recognised stock exchange was made null and void. Thus, such a contract was not enforceable. The only real exception (apart from certain territorial exceptions) to was “spot transactions”. This covered a contract of purchase and sale of securities where the delivery/payment was spot – which was effectively defined to be that the delivery of shares and payment was to be made within one day of the contract.

The law as so framed ensured that forward/futures/ options trading in securities could not be carried out without being regulated. However, a simple transaction of private sale and purchase of shares and other securities on ready payment/delivery basis was exempted.

The wording of this law, however, had a peculiar consequence. It meant that no contract of sale/ purchase of securities could be entered into unless it fell into the very narrow exempted category. For most practical purposes, one could not enter into a valid agreement to buy/sell shares in the future. Or enter into an agreement where involving postponement of the payment of consideration and/or delivery of the securities beyond one day. As joint ventures, private equity, co-promoted companies, etc. became increasingly common, this became a serious concern. Parties entering into such agreements could not bind each other with such basic commercial safeguards. This was despite the fact that almost all of such agreements could not even remotely affect public interest, being entered into by informed parties on a negotiated basis without any intention of trading.

In practice, this problem was dealt with parties by often being in denial or half-baked structuring or even sheer ignorance. Some legal counsels even opined that, structured in a particular way, the notification did not apply to private agreements. The reality, however, was that even in the most optimistic scenario, often, there was concern that, if put to test, many of such clauses in agreements may not be held valid. Thus, what was referred to euphemistically as a “calculated risk” was taken. The fact that Supreme Court, other courts and SEBI held many of such agreements to be unenforceable worsened matters (the various decisions and their legal basis can be subject for a separate detailed article).

The matter became more complicated when this issue spilled over to other laws including laws regulating foreign exchange.

SEBI’s recent circular gives relief – with some conditions

Finally, on 3rd October 2013, SEBI issued a circular withdrawing the earlier notification and allowing parties to enter into agreements for purchase/sale of shares, though with certain conditions which are fairly reasonable. Let us consider which of such contracts are exempted and under what conditions.

The first two exemptions are as expected and continuing ones. “Spot Delivery Contracts” are exempted. Purchase or sale of securities/derivatives on stock exchanges in accordance with law and bye-laws, etc. of such exchanges are also exempted.

Next exempted category is “contracts for preemption including right of first refusal, or tag-along or drag- along rights contained in shareholders agreements or articles of association of companies or other body corporate”. Thus, all contracts of pre-emption are exempted, including the specified ones such as right of first refusal, etc. These may be contained in the agreements between shareholders and/or incorporated in the articles of association of the company.

Then come certain “options” in agreements between shareholders (or contained in the articles of association). Such options provide a right to one person to buy or sell shares. On exercise of such options, the actual purchase/sale of shares is effected. Such agreements are also exempted, subject, however, to certain conditions. Firstly, the securities underlying such options should have been held continuously for at least one year by the selling party. This is effectively a lock-in period. Secondly, the price/consideration for such purchase/sale of shares should be in compliance with prevailing laws. Finally, the contract, i.e., the purchase/sale is settled by actual delivery of the underlying securities.

The circular makes it clear that the contracts will continue to have to adhere to FEMA and Regulations/Rules issued thereunder. FEMA has other policy considerations and hence such agreements particularly with parties across the border would require such compliance.

Will the relaxations apply to existing agreements?

An interesting provision is made for agreements for purchase/sale of shares existing on the date of this circular. It is clarified that this circular shall neither affect nor validate agreements existing immediately prior to the date of the circular. In other words, all such existing agreements shall continue to be subject to the earlier law. Only those contracts having such clauses and which are entered into on or after the date of this circular would benefit from the relaxations made in it, subject of course complying with the conditions stated therein.

There have been views expressed that parties could merely re-execute such contracts as of a date after the date of such circular. This sounds like a fairly simple solution to the thousands of agreements existing as on such date, though one wonders whether it is simplistic too. The practical hurdle is whether all the parties concerned would readily agree to re-execute such past agreements. In practice, often relations may have soured between the parties who may want to re-negotiate certain terms of the agreement if it has to be re-executed. Obviously, though the party entitled to the rights may be keen, the party who is subject to the obligations may not readily agree. Then there is a commercial reality that was often observed in practice. Many parties entered into some version of such agreements knowing quite well that they are likely to be unenforceable. Hence, they considered the likelihood of being required to act upon it fairly remote and considered that if at all such transactions were to be executed, the parties could consider the offered terms and generally the reality at that time. The party entitled to the rights too may not have really believed that it would actually get them. Clearly, these parties never intended such agreements to have unqualified binding force and they may not agree to re-execute them to give them such force. Thus, the parties would want to re-negotiate the contract instead of merely printing out a copy and re-executing the same today.

Applicability to other laws for certain contracts

The circular also clarifies that as far as government securities, gold related securities, money market securities, contracts in currency derivatives, interest rate derivatives and ready forward contracts in debt securities entered into on the stock exchange are concerned, they shall be in accordance with various specified laws such as securities laws, banking laws, FEMA, etc.

Anomalous provision in Companies Act, 2013

In this context, it is necessary to discuss a strange provision in the recently notified Companies Act, 2013. Section 194, which incidentally has been notified as to have come into effect, prohibits certain contracts by directors/key managerial persons of companies. The specified contracts are rights (or a right exercisable at option of such person) to call for delivery or make delivery of a specified quantity of shares/debentures, at a specified price and within a specified time. It appears that the intention is to prohibit contracts of futures/options. While this is consistent with the existing provisions under the SEBI Regulations relating to prohibition of insider trading, this provision is too widely worded. The SEBI Regulations are intended to prohibit directors/officers/designated employees from entering into derivatives transactions of their companies. However, the scope of section 194 is very broad. It is a blanket ban on all agreements giving any right or option to acquire/sell shares. Further, the section applies to all companies – listed, unlisted or even private. It does not even give exemption to employees’ stock options. Thus, despite the relaxation by the circular, this ill-advised provision in the Act can present problems. On the other hand, it applies only to directors/key managerial persons and not others including other promoters or promoter companies.

Curiously, the Explanation to this section seems to modify its scope. Firstly, it states that it would apply to those shares/debentures where the concerned person is a whole -time director and not merely a director. Secondly, the shares/debentures may be of the employer company or its holding company or its subsidiary. Even more curiously, the initial part of the section refers also to “associate” companies. Further, the ban in the section is on “buying” such rights and one thus wonders whether such rights granted to employees or otherwise forming part of contracts are also covered. The section is an example of bad drafting. To summarise, however, this provision will create hurdles in case of whole-time directors/key management persons in entering into agreements to buy/sell shares in the future or acquire options for such buy/sell of shares.

To conclude, SEBI has finally provided relaxation to genuine contracts between parties that faced the possibility of being treated as impermissible under SEBI regulations though they did not affect public interest.

Rewriting and Revising Securities Laws – Highlights of some recent amendments

This series of articles introducing securities laws for listed companies to the lay reader continues …

1) SEBI has been busy in recent times and several revisions/amendments have been made, some of which are highlighted here.

2) SEBI rewrites  and replaces  the DIP Guidelines 2000 with  ICDR Regulations  2009

a. While not comparable to the Direct Taxes Code which seeks to rewrite the direct taxes laws into what is hoped to be an easy to understand law, SEBI too has undertaken a comparable exercise and has replaced the almost one-decade old DIP Guidelines with a re-written (though not overhauled) Regulations – the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009 or ‘the Regulations’.

b. Readers may recollect that the DIP Guidelines mainly regulate issue of securities to the public, shareholders and others. They regulate initial pubic offers, rights issues, preferential issues, etc. They provide for very detailed provisions which border on micro-regulation of every aspect of the process of such issues. These Guidelines are very frequently amended. For listed companies, their promoters and merchant bankers, these guidelines are literally like a Bible which they need to keep handy for regular reference.

c. As can be expected, frequent changes have made the Guidelines unwieldy and complex. Further, when one writes a set of clauses, one may have a central theme in mind. However, as new clauses and provisos and explanations are inserted and amended, the new set of clauses represent neither the original harmo-nious theme nor a new one but represent a hotch potch of ideas.

d. Another aspect of these Guidelines was that they were not, in my opinion and also as held in decisions, law in the strictest sense of the word. These guidelines were obviously not Parliament-made law nor could they be compared to Regulations and Rules which the Act provides for and which are also laid before Parliament later. Rather, they represented the provisions made by SEBI from time to time. While there is nothing wrong in SEBI prescribing such Guidelines – indeed this manner is inevitable and required in dealing with the dynamics of the capital market, a question often arises as to what their legal status is and what could be the penal consequences of their violations.

e. Thus, the replacement of the Guidelines with Regulations at least removes this concern over their legal status. Incidentally, though, the SEBI Act will now need to be amended to provide for specific punishment for violation of these Regulations since otherwise, the violation of these newly notified Regulations will fall under the residuary provisions and this mayor may not achieve the object that SEBI may have in mind. In fact, it may make sense if different provisions of these new Regulations are treated differently and thus separate punishment is provided for violations having differing intensity or seriousness. However, that would require a Bill to amend the SEBI Act itself.

f. In any case, to reiterate, the Guidelines are now replaced by Regulations whose violations can be punished with significant penalty and/or prosecution.

g. While it would be a mammoth exercise to compare the old Guidelines and the new Regulations and even to highlight the changes, suffice it to say that the intention has not been to completely rehaul the provisions. Future articles here may highlight some interesting implications particularly arising out of change in wording.

h. Further, the Regulations represent the DIP Guidelines rewritten but in most cases without any intention of changing the law. However, how well this intention of keeping the substantive law intact will be successful will be shown by time and experience in varying situation since the wording would often show up differently when one tries to apply and interpret them.

i. On first appearances, the substantive provisions and clauses have been trimmed and made more compact. However, part of the reason for the substantive clauses appearing more compact is also because the Regulations are now divided into substantive clauses and drafts of various precedents, forms, agreements, etc.

j. Consequential changes have been made in the SEBI ESOPs Guidelines and the Listing Agreement.

3) Ban on issue of shares with superior voting rights:

a. SEBI has issued a circular dated July 21, 2009, to make amendments to prohibit issue of shares with superior voting rights by listed companies. Earlier to this, SEBI had a Press Release announcing the decision to make such changes. Incidentally, the actual amendment covers all superior rights as to voting as well as dividends. The original decision as per the Press Release read that “No listed company can issue shares with superior voting rights.”.

b. The amendment is by way of insertion of a new clause 28A to the Listing Agreement. The amendment is to come into immediate effect though because of the peculiar status of Listing Agreement, one will also have to wait for amendment of the Listing Agreement by the respective stock exchanges.

4) The new clause is brief and is reproduced for ready reference:

“28A. The company agrees that it shall not issue shares in any manner which may confer on any person, superior rights as to voting or dividend vis-a-vis the rights on equity shares that are already listed.”

5) The following are some quick comments and concerns :

a) The prohibition is on issue of shares with ‘superior’ rights and not on ‘inferior’ rights.

b) A corollary from the earlier point, if a company issues shares with ‘inferior’ rights, those shares will then become the new benchmark. If one takes this further logically, then, thereafter, even ‘normal’ equity shares cannot be issued since these normal shares would have ‘superior’ rights as compared to the existing shares with ‘inferior rights’ assuming such latter shares are also listed !

c) Can the amendment affect issue of preference shares which have priority of dividends and at times even rights of sharing further dividends? Or can one say that the intention is to cover issue of equity shares only since the comparison is made to existing equity shares?

d) To bring the change into effect, the Listing Agreement is amended. This is curious. One would have thought the SEBIDIP Guidelines/ ICDR Regulations could have been a better place.

e) Would special rights given to certain investors/ promoters under the Articles of Association such as veto rights, special rights, etc. be deemed to be ‘superior rights as to voting’ ? Can it be said that the ban applies only where the superior rights are given to the ‘shares’ and not to the ‘persons’ holding such shares?

6) SEBI issues circular to formalise clarifications on 5% additional creeping acquisition

a) It may be recollected that late last year, SEBI had amended the Takeover Regulations to provide for a creeping acquisition window between 55-75%. These amendments permitted acquisition of further shares upto 5% for persons who held shares between 55-75%. A circular has been issued recently to clarify on some of the concerns expressed.

b) The circular is fairly self explanatory. A few quick comments though.

i) The clarifying circular is issued under Regulation 5 which permits SEBI to, inter alia, issue directions to remove difficulties in interpretation. S. 11 of SEBI Act is also relied on.

ii) It is seen that some of the interpretations so given go clearly beyond the plain wording and meaning. It is possible that in the future, a legal issue may come up whether such ‘clarification’ can go beyond the express and unambiguous wording of the Regulations.

iii) It is clarified that the 5% acquisition may be made in one or more tranches and also without any time limit.

iv) For calculating the 5% acquisitions, sales cannot be netted off. Thus, only gross purchases would be counted. For example, the acquirer cannot purchase 4%, then sell 3% and then acquire another 4% and claim that the net purchases are within the 5% limit.

v) The cumulative holding of the acquirer cannot exceed 75%. Thus, a person holding, say, 73% can acquire only a further 2%.

vi) The cumulative holding limit of 75% is irrespective of the minimum public share-holding that is required to be maintained under the Listing Agreement. Thus, e.g., in respect of a company having a 10% minimum public shareholding, the upper limit for this Regulation will still be 75% and not 90%.

7) SEBI clarifies on Insider Trading Regulations amendments of November 2008.

a) SEBI had amended the Insider Trading Regulations 1992 vide a Notification dated November 19, 2008. SEBI has now released a set of ‘Clarifications’ on 24th July 2009 on certain issues arising out of the amendments made.

b) Curiously, the ‘clarifications’ have no formal standing or reference. It is neither a circular, nor a notification, nor even a press release. It is neither signed nor dated. But it seeks to ‘clarify’ and give meaning to the Regulations that have legal standing and where such ‘meaning’ is quite contrary – as we will see to the plain reading of the text. Having said that, the ‘clarifications’ mostly relax the requirements and hence, being gift horses, one should not examine them in the mouth too closely!

C) Let us consider  the clarifications  given.

i. lt may be recollected that specified persons were banned from carrying out opposite transactions’ (banned transactions’) for six months of original buy/sale (‘original transactions’). The question was whether acquisition of shares under ESOP scheme and sale of such shares would be considered as transactions that trigger off such ban and whether these themselves are banned. It is clarified that exercise of ESOPs will neither be deemed to be ‘original transaction’ nor ‘banned transaction’. Thus, by acquiring shares under ESOPs, you don’t trigger a ban and if you are banned for six months, you can still exercise ESOPs. The reasoning given is that the ban is only on transactions in secondary market.

ii. Sale of shares acquired through ESOPs is covered but it will only be deemed to be an ‘original transaction’ and not a ‘banned transaction’. In other words, even if you are under a ban, you can still sell shares acquired under ESOPs but once you sell such shares, you have triggered a ban of six months. On this aspect, I do not understand the basis of clarifying that the sale of shares acquired under ESOPs scheme will not be an ‘original transaction’ – the logic of covering secondary market transactions should apply here also.

iii. Then, it is clarified that every later transaction triggers a fresh six month ban. A purchase on 1st February results in ban till 1st August. However, if there is a fresh purchase on 15th March, there is a ban now till 15th September. Effectively, this means that the ban period is from 2nd February till 15th September.

iv. What about transactions before this amendment – will the amendment create ban in respect of them too – this is an academic issue now at least as the six month period is now complete. It is clarified though that the transactions before the amendment are not to be considered. On a similar note, unwinding of positions in derivatives held on the date of this amendment is possible.

v. A crucial clarification is that the ban on ‘sale’ of shares for personal emergencies is permissible by waiver by the Compliance Officer. This is not evident from a plain reading of the provision. But SEBI thinks it is so evident and hence let us accept this gift without creating legal niceties! Note that this clarification applies only to sales and there can be no purchases within these six month ban period – obviously there cannot be any personal emergency to purchase shares !

vi. It is also clarified that tile ban on derivatives does not apply to NIFTY/SENSEX futures.