Securities Regulation and Corporate Governance
Reliance Industries Limited and Ors. Vs. Securities & Exchange Board of India (2 May 2025 – SEBI / SAT): MANU/SB/1704/2025
Reliance Industries Limited (“RIL” or “Appellant”) and Facebook Inc. entered discussions regarding a potential investment by Facebook in Jio Platforms Limited (“Jio”), a subsidiary of RIL. While negotiations and due diligence were underway, a Financial Times article dated 24 March 2020 reported that Facebook was close to finalising a deal to acquire a 10% stake in Jio. The news was widely republished by various media outlets in India, although RIL declined to comment publicly at that time. On 22 December 2021, SEBI issued a show cause notice alleging violations of Schedule A read with Regulation 8(1) of SEBI (Prohibition of Insider Trading) Regulations, 2015 (“Insider Trading Regulations”) and Regulation 30(11) of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (“Listing Regulations”). After considering the written submissions and personal hearings, SEBI passed the impugned order, leading to the present appeal before the Securities Appellate Tribunal (“SAT”).
The erstwhile Regulation 30(11) of the Listing Regulations provided below:
“The listed entity may on its own initiative also, confirm or deny any reported event or information to stock exchange(s):
Provided that the top 100 listed entities (with effect from October 1, 2023) and thereafter the top 250 listed entities (with effect from April 1, 2024) shall confirm, deny or clarify any reported event or information in the mainstream media which is not general in nature and which indicates that rumours of an impending specific material event or information in terms of the provisions of this regulation are circulating amongst the investing public, as soon as reasonably possible and not later than twenty four hours from the reporting of the event or information.”
Issue:
The primary issue in adjudication was the alleged violation of Principle 4 of Schedule A of the Insider Trading Regulations pertaining to the “Principles of Fair Disclosure for purposes of Code of Practices and Procedures for Fair Disclosure of Unpublished Price Sensitive Information”. Principle 4 requires “Prompt dissemination of unpublished price sensitive information that gets disclosed selectively, inadvertently or otherwise to make such information generally available”. The Appellant’s primary counter-contention was that, under Principle 4, prompt disclosure of unpublished price sensitive information is required only once such information becomes concrete, credible and likely to have a significant impact on price discovery. Accordingly, the Appellant maintained that since the news of Facebook’s investment was published by independent media, such information could not be considered credible, and there was no duty to disclose its veracity.
Held:
The SAT held, that the information pertaining to the investment could not be regarded as “non credible”. Given that two major global conglomerates were involved in a significant cross-border investment requiring discussions and approvals at the highest levels in both groups, the information was inherently credible for the company and its insiders. Moreover, RIL had already created a structured digital database, and both parties had entered into a confidentiality agreement. Thus, SAT held that the information could not be treated as “not credible” as of 24 March 2020. Further, there was a sharp increase of about 15% in the share price of Reliance once the news got reported to the media. Therefore, the Appellant had not fulfilled its duty under Principle 4 of Schedule A of the Insider Trading Regulations to make available any information that had been disclosed inadvertently.
Additionally, SAT held that though the news about the investment had been published in the media, the Appellant continued to have an obligation to provide investors and the public with an authentic and comprehensive clarification on the matter. Without an official statement, unverified or speculative reports could continue to circulate, potentially undermining the integrity of the securities market.
SEBI Informal Guidance on acquisition timing under the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011
SEBI has, vide informal guidance letter dated 19 June 2025 to Pritish Nandy Communications Limited (“Target Company”), clarified the basis for determining the timing of an acquisition under the SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 (“SAST Regulations”). The Target Company was a listed entity with the promoter group holding 54.84% of the shareholding as of 31 March 2024. Ideas.Com India Private Limited (“Acquirer”) acquired 4.31% of shares (amounting to 6,23,950 equity shares) on 28 March 2025. However, since trading holidays fell on 29 March 2025, 30 March 2025, and 31 March 2025, the acquisition of 6,23,950 equity shares made on 28 March 2025 did not reflect in the BENPOS for the financial year 2024–2025.
The main query that was sought in the guidance letter was whether the word “acquisition” under the SAST Regulations should be considered in the financial year in which the share acquisition was contracted or in the financial year in which the share delivery was completed.
SEBI held that the term “acquisition” includes an agreement to acquire, i.e. a prospective agreement to acquire in the future. This is supported by Regulation 2(1)(a) of the SAST Regulations which provides that an “acquirer means any person who, directly or indirectly, acquires or agrees to acquire…”. Relying on Regulation 3 (2) of the SAST Regulations, SEBI further clarified that it is not the completion of the acquisition of shares or voting rights, but the intention to acquire that is the determining factor under Regulation 3(2) read with Regulation 13 of the SAST Regulations. Therefore, acquisition of shares may be considered to have occurred in the financial year in which the purchase order was placed for execution of the trades.
SEBI (Listing Obligations and Disclosure Requirements) (Third Amendment) Regulations 2025
The SEBI (Listing Obligations and Disclosure Requirements) (Third Amendment) Regulations, 2025, dated 8 September 2025, introduced a new sub-regulation under Regulation 39(2A), requiring that any issue of securities pursuant to a scheme of arrangement, subdivision, split or consolidation be made only in dematerialised form. Investors who do not have a dematerialised account must have one opened by the listed entity.
Additionally, Regulation 91(C)(1) now requires Not for Profit Organisations registered on the Social Stock Exchange to make annual disclosures as specified by SEBI. Financial disclosures must be made by 31 October of each year or before the due date of filing of income tax returns as prescribed under the Income Tax Act,1961 whichever is later, while non-financial disclosures must be made within a period of 60 days from the end of the financial year.
Lastly, Regulation 91(E)(2) was amended to require Social Enterprises registered with a Social Stock Exchange or Stock Exchange to submit an annual report, which must be assessed by a Social Impact Assessment Organisation confirming that at least 67% of the program expenditure in the previous financial year was utilized.
Ease of doing investment – Smooth transmission of securities from Nominee to Legal Heir
A SEBI Working Group recommended that reporting entities should use the code “TLH” (Transmission to Legal Heirs), while reporting transactions to the Central Board of Direct Taxes when a nominee is transferring securities to a legal heir. The objective of the circular was to facilitate a seamless transfer of securities because presently the nominee while transferring securities to the legal heir gets assessed for capital gains tax and has to claim a refund of the capital gains tax thereafter. The circular applies to Registrars to an Issue and Share Transfer Agents, Listed Issuers and Depositories.
Clarification on the position of Compliance Officer
SEBI has, vide circular dated 1 April 2025, provided clarification on the organizational positioning of the Compliance Officer in listed entities.
Key Highlights:
The Compliance Officer must be:
- in whole-time employment,
- not more than one level below the board of directors, and
- designated as a Key Managerial Personnel.
Clarification on “One-Level Below”:
- SEBI received queries seeking clarity on the term “level” used in Regulation 6(1) of the Listing Regulations. SEBI has clarified that “one-level below the board of directors” means one-level below the Managing Director or Whole-time Director(s) who are part of the board of directors of the listed entity.
- Further, in cases where a listed entity does not have a Managing Director or Whole-Time Director, the Compliance Officer must not be more than one level below the Chief Executive Officer, Manager, or any other individual heading the day-to-day affairs of the listed entity.
Trading window closure to immediate relatives of Designated Persons.
SEBI has, vide circular dated 21 April 2025, extended the scope of automated trading window closure to include immediate relatives of Designated Persons (“DPs”), specifically during the period surrounding the declaration of financial results.
Key Provisions:
- Under Clause 4 of Schedule B, read with Regulation 9 of Insider Trading Regulations, trading by DPs and their immediate relatives is restricted during periods when they may possess unpublished price sensitive information.
- The trading window remains closed from the end of each financial quarter until 48 hours after the declaration of the financial results.
- As per Clause 3.4.2 of the Master Circular on Surveillance of Securities Market, PAN-level trading restrictions will now apply to immediate relatives, in addition to DPs.
Implementation Timeline:
- Phase 1: Top 500 listed companies (by BSE market cap as of 31 March 2025) on BSE, NSE, and MSEI – effective 1 July 2025.
- Phase 2: All other listed companies and those listed post-circular issuance – effective 1 October 2025
Compliance Requirements:
- Listed entities must upload PAN details of DPs and their immediate relatives to the designated depository portal.
- Trading restrictions will be enforced at the PAN-ISIN level during the closure period.
For more information contact:
Sneha Nagvekar
Partner & Practise Head – Public M&A & Securities Regulations
sneha.nagvekar@veritaslegal.in
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