The Securities and Exchange Board of India (SEBI) has been very active in enhancing its regulatory framework in order to keep up with its regulatory objectives of transparency, fairness, and accountability in the securities market. A significant measure in this direction is the mandating of the Structured Digital Database (SDD) as per SEBI's Prohibition of Insider Trading (PIT) Regulations. The organization of a digital database circular is primarily concerned with ensuring that companies and market intermediaries properly document the occurrences of unpublished price-sensitive information (UPSI) and the persons having access to it.
Purpose of the Structured Digital Database
The primary objective of the SEBI circular is to cut down on the risk of insider trading through the creation of a system that is auditable and tamper-proof. The SDD is a digital repository that records details of every insider who is in the know of UPSI. This allows regulators to efficiently follow up and identify the source of leaks if they do occur. By issuing a mandate for the structured and secure system, SEBI has introduced more order and standardization in the area of record-keeping.
Key Compliance Requirements
The SEBI circular requires listed companies, intermediaries, and fiduciaries to set up and maintain a structured digital database that meets the following conditions:
- Audit Trail – The database is required to have a thorough audit trail of all its entries, including dates, time stamps, and the details of the person who keyed in or retrieved the data. The provision for amendments or deletions of entries should be entirely ruled out, thus guaranteeing data integrity.
- Confidentiality – Apart from ensuring the confidentiality of the SDD through enough security measures, it should also enable the authorized personnel to have access to the SDD.
- Coverage of Insiders – Besides the database recording the names of persons sharing UPSI, it should also store the Permanent Account Number (PAN) or other identification info for those persons.
- Preservation of Records – The database has to be kept for a period of not less than eight years from the date of the transaction in question or until the completion of the investigation, whichever is later.
Implementation Challenges
Despite the fact that the SEBI circular intends good things for the companies, they have practical problems implementing it. Among the challenges faced by companies are:
- Technological Adaptation - Quite a few organizations will need to spend money on specially created software to be able to put together an SDD system that complies with the law.
- Data Security Concerns – Cybersecurity is the main concern because the database stores very sensitive information.
- Training and Awareness – Only if they are trained properly, employees and compliance officers will make accurate and consistent records in their work.
Benefits of Compliance
The structured digital database is a good tool for long-term success despite the hurdles that may be encountered during its implementation. This is one way to attract and keep investors. It also improves the company's internal governance and can lower the chances of getting penalized by the regulators. Also, when the company has such a database, the regulators have a simple audit process since they can easily get access to the records that they need.
Conclusion
The SEBI circular concerning the structured digital database represents a significant step in the fight against insider trading. By requiring listed entities and intermediaries to keep an electronic and tamper-proof record of information dissemination, SEBI has promoted market integrity and investor confidence. Corporations that consider this not only as a compliance mandate but also as a chance to deepen governance will be the ones that can survive the regulated market environment and go ahead.
