Who is an insider

Under the SEBI’s Prevention of Insider Trading regulations (referred to as “PIT Regulations”), the
term ‘insider’ includes:

(a) connected person;

(b) Any person in possession of unpublished price sensitive information (such information is
referred to as “UPSI”).

The definition of ‘connected person’ is provided in Annexure I.

From the aforesaid definitions of ‘insider’ and ‘connected person’, it may be inferred that connected
person is deemed to be ‘insider’ even if the said connected person is not in possession of UPSI, but is
in position to have an access to UPSI or is reasonably expected to have such access.

In view of the aforesaid definitions, with respect to Samhi Hotels Limited, Asiya may be deemed to
be insider as Asiya would reasonably expected to have an access to UPSI through its nominee on the
board of Samhi.

Trading in shares

In terms Reg 4 of PIT Regulations, no insider shall trade in securities that are listed when in
possession of UPSI. When a person has traded in securities while in possession of UPSI, his trades
would be presumed to have been motivated by the knowledge and awareness of such information in
his possession.

Penalty for insider trading

Insider trading is punishable with a penalty of atleast INR 1 million, but which may extend to INR 250
million or three times of profit made by insider trading, whichever is higher.

Defence available

A. Following relevant defence are available:

(a) the transaction was carried out through the block deal window mechanism between
persons who were in possession of UPSI without being in breach of PIT Regulation
and both parties had made a conscious and informed trade decision.
(b) the trades were pursuant to a trading plan set up in accordance with Reg 5 of PIT
Regulation.
(c) The transaction in question was carried out pursuant to a statutory or regulatory
obligation to carry out a bona-fide transaction.
(d) The transaction is an off-market transaction, transfer between the person who were
in possession of same UPSI without being in breach of regulation 3, and both parties
had made a conscious and informed trade decision.

In the case of connected persons, the onus of establishing that they were not in possession of USPI,
shall be on such connected persons.

B. In case of non-individual insider (applicable to Asiya in this case), it would also be a defence to
prove that:
 (a) the individuals who were in possession of such UPSI were different from the individuals
taking trading decisions and such decision-making individuals were not in possession of such
UPSI when they took the decision to trade; and
(b) appropriate and adequate arrangements were in place to ensure that these regulations are
not violated and no UPSI was communicated by the individuals possessing the UPSI to the
individuals taking trading decisions and there is no evidence of such arrangements having
been breached.

In case the defence under para A above is not available, Asiya will have to defend allegations of
insider trading as per para B aforesaid. It may be noted the both para B(a) and B(b) needs to be
satisfied to avail this defence.

Para B(a)
We understand that trading decisions would be made by the board of ACIC Mauritius 1. We also
understand that Asiya’s nominee on the board of Samhi Hotels Limited is not on the board of ACIC
Mauritius 1. For satisfaction of para B (a) above, it needs to be established that the board of ACIC
Mauritius 1 was not in possession of UPSI while taking trading decisions.

Para B(b)
For the purpose of para B(b), the PIT Regulations do not prescribe what are the ‘appropriate and
arrangements’. However, the following can be considered as appropriate and adequate measures:

(i) Creating effective Chinese walls - physical separation of board members of ACIC Mauritius 1
who are taking trading decision with Asiya nominee on the board of Samhi Hotels Limited to
isolate them from one another;
(ii) Regular training program for the organisation to apprise them of the PIT Regulations and to
emphasise the importance of not improperly or inadvertently divulging confidential
information;
(iii) Execution of a strict confidentiality and non-disclosure agreement by Asiya’s nominee
relating to UPSI.
(iv) Monthly written confirmation from Asiya’s nominee confirming that no UPSI has been
divulged to any person in the organisation;
(v) Strict and carefully defined procedures for dealing with the situation where the Chinese wall
is crossed;
(vi) Disciplinary sanctions where there has been an improper breach of the wall;
(vii) Regular monitoring of the aforesaid measures and making necessary changes to make them
more effective.
(viii) Maintain accurate records of all communication, disclosures, and pre-clearance requests
related to UPSI to demonstrate compliance with SEBI regulations.
(ix) Establishing secured communication channels for discussing UPSI with the company, such as
encrypted mails, secure messaging platforms, or designated meeting rooms.

In our understanding though (ii) to (vii) above may still be complied with, since Asiya’s nominee
(Ajish) and one of the ACIC Mauritius 1 board member (Sohail) operate out of same office, it will be
difficult to comply with (i) above.

Alternatives

Following alternatives may be considered:

 1. As Faisal located in different country, appointment of Faisal as nominee on the board of
Samhi Hotels Limited may be considered. This will create effective physical barrier between
the board of ACIC Mauritius 1 and the Asiya’s nominee on the board of Samhi Hotels. This on
the assumption that (ii) to (vii) above are being complied with.
2. Having no representation on the board of Samhi Hotels.
3. Formulation of trading plans and getting the same approved by compliance offer of Samhi
Hotels and trading in the shares strictly as per the trading plan.
4. Trading may take place when there is no UPSI in possession of Asiya’s nominee or the board
of ACIC Mauritius 1 and all price sensitive information has been disclosed by Samhi Hotels to
the stock exchange / on its website.

Please note that in case of alternative 3 as stated above, there is a wait period of 6 months from the
date of approval and publication of trading plans and no trading can take place during the said 6
months period and the trading plan should entail trading for a period of not less than twelve
months.
Annexure – 1

"connected person" means -

(i) any person who is or has during the six months prior to the concerned act been associated with a
company, directly or indirectly, in any capacity including by reason of frequent communication with
its officers or by being in any contractual, fiduciary or employment relationship or by being a
director, officer or an employee of the company or holds any position including a professional or
business relationship between himself and the company whether temporary or permanent, that
allows such person, directly or indirectly, access to unpublished price sensitive information or is
reasonably expected to allow such access.

(ii) Without prejudice to the generality of the foregoing, the persons falling within the following
categories shall be deemed to be connected persons unless the contrary is established, -

(a) an immediate relative of connected persons specified in clause (i); or

(b) a holding company or associate company or subsidiary company; or
(c) an intermediary as specified in section 12 of the Act or an employee or director thereof; or
(d) an investment company, trustee company, asset management company or an employee or
director thereof; or
(e) an official of a stock exchange or of clearing house or corporation; or
(f) a member of board of trustees of a mutual fund or a member of the board of directors of
the asset management company of a mutual fund or is an employee thereof; or
(g) a member of the board of directors or an employee, of a public financial institution as
defined in section 2 (72) of the Companies Act, 2013; or
(h) an official or an employee of a self-regulatory organization recognised or authorized by the
Board; or
(i) a banker of the company; or
(j) a concern, firm, trust, Hindu undivided family, company or association of persons wherein a
director of a company or his immediate relative or banker of the company, has more than
ten per cent. of the holding or interest;