ESOPs out of insider trading regulations

In a decision that will come as a big relief for India Inc, SEBI on Monday said buying and selling shares as part of Employee Stock Option Programme (ESOP) will not be covered under the insider trading regulations. However, companies are required to comply with disclosure norms as applicable under the regulations.

  This will remove the difficulties of the designated persons with regard to exercise of ESOPs and the sale of shares so acquired, SEBI said.

Big relief SEBI’s clarification clears the air on an important issue that has irked companies keen to reward employees with stock option plans. They feared that ESOPs would fall under the definition of ‘trading’ under the insider trading regulations and had represented to the regulator in this regard.

SEBI’s board meet on Monday also decided that listed companies having employee benefit trusts have to reclassify the shareholding of these trusts under the ‘non-promoter and non-public’ category. They will also have to ensure compliance with the requirement of minimum public shareholding within three years, as against five years at present, from the date of notification of SEBI’s Share Based Employee Benefits Regulation (SBEB).

The SEBI board also allowed employee benefit trusts to offer shares (under the tender offer route) through the stock exchange platform, without requirement of minimum holding period.