Structured Digital Database (SDD) and SEBI's Regulations

Structured Digital Database (SDD) and SEBI's Regulations: Ensuring Compliance and Transparency for insider trading regulations.

Structured Digital Database (SDD) has been a buzzword in the Indian financial market ever since the Securities and Exchange Board of India (SEBI) introduced it under the SEBI (Prohibition of Insider Trading) Regulations, 2015. SEBI aims to regulate insider trading activities in the Indian stock market, which includes the use of Unpublished Price Sensitive Information (UPSI). In this article, we will discuss what UPSI is, what SDD is, SEBI's regulations regarding Structured Digital Database SDD, and what to expect from a SDD compliance software.


What is UPSI?

Unpublished Price Sensitive Information (UPSI) is any information that is not available to the public and can significantly affect the price of the securities of a company. It includes financial results, mergers and acquisitions, dividend announcements, major expansion plans, etc. Any person who has access to UPSI is prohibited from trading securities of the company until the information becomes public. Trading based on UPSI is considered insider trading, which is illegal in India.


What is SDD ?


Structured Digital Database (SDD) is a digital database that companies can use to maintain a record of UPSI. The SEBI (Prohibition of Insider Trading) Regulations, 2015, requires every company to maintain an SDD to monitor and regulate the use of UPSI. SDD is a digital platform where the company can store all the UPSI that it possesses. The information stored in the Structured Digital Database SDD can be accessed by the company's designated persons who require it for discharging their duties.


SEBI (Prohibition of Insider Trading) Regulations- Regulation 3(5)


Regulation 3(5) of the SEBI (Prohibition of Insider Trading) Regulations, 2015, mandates that every company shall maintain a structured digital database to record the name of the persons who have access to UPSI and the details of the UPSI. The SDD should be maintained in a secure manner to prevent unauthorized access, and the data should not be tampered with.

SEBI Requirements

SEBI has laid down specific requirements that companies must fulfill while maintaining an SDD. The requirements are as follows:

Timestamping: The Structured digital database should have a timestamping feature that records the date and time of access to the UPSI.

On-Premises hosting of information maintained internally: The company should host the SDD on its premises and not on a cloud-based platform.

Non-tampering of data: The data stored in the Structured digital database should be tamper-proof and should not be altered without proper authorization.

Audit trail: The SDD should have an audit trail feature that records every activity related to the UPSI stored in the database.

Maintenance of historical data: The company should maintain the UPSI stored in the SDD for a minimum period of eight years.

What to expect from a SDD compliance software?

Companies can use SDD compliance software to maintain an SDD that meets SEBI's requirements. A Structured digital database compliance software should have the following features:

Generate customized reports: The software should be able to generate customized reports based on the data stored in the Structured Digital Database SDD.

Master data of DP, UPSI, Auditor, Company: The software should have a master data feature that records the details of the designated persons, UPSI, auditors, and the company.

Easy to use: The software should be user-friendly and easy to use, even for non-technical personnel.

Maintain database with adequate internal controls (timestamping, audit trails, etc.) to ensure non-tampering of data: The software should maintain an SDD with adequate internal controls to prevent unauthorized access and tampering of data.

By maintaining an SDD, companies can avoid legal repercussions and build investor confidence. Therefore, it is crucial for companies to adopt a SDD compliance software to comply with SEBI's regulations and ensure a fair and transparent stock market.


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