ANONYMITY WITHOUT A SAFE HARBOUR: THE RESTORED OPEN-MARKET BUY-BACK AND INDIA’S UNANSWERED INSIDER TRADING QUESTION

This piece is authored by Amogh Singh, second-year B.A. LL.B (Hons.) student at The West Bengal National University of Juridical Sciences, Kolkata.

THE REGULATORY CHANGE

Since 1 August 2026, a listed Indian company may once again purchase its own shares in the open market through a stock exchange. The SEBI (Buy-Back of Securities) (Amendment) Regulations, 2026 revived a route that had been withdrawn with effect from 1 April 2025; and the commentary that followed, remained concentrated on the visible changes: the ceiling of less than fifteen per cent of paid-up capital and free reserves, the sixty-six working day execution window, the ISIN-level freeze on promoter holdings under the new Regulation 24(i)(ea), and the discretionary merchant banker. Two deletions attracted far less attention. The Explanation to Regulation 16(i), which obliged exchanges to run a separate window for buy-back trades, has been omitted, and so has Regulation 17(i), which required the identity of the company as purchaser to appear on the electronic screen when its order was placed. The Bombay Stock Exchange (“BSE”) confirmed on 31 July 2026 that buy-back trading would thereafter be undertaken through the same window as the ordinary secondary market. The issuer is now an unmarked participant in its own order book. This piece traces those two deletions, diagnoses the gap they leave under the insider trading regime, tests that diagnosis against a comparable regime, and closes with four calibrated reforms.

The reasoning is recorded in SEBI’s consultation paper of 8 May 2026. The Primary Market Advisory Committee observed that the separate window had been introduced principally to identify investors eligible for beneficial tax treatment, that the distinction had disappeared once buy-back consideration ceased to attract differential treatment, and then added, in a single further sentence, that on-screen display of the company’s identity as purchaser “may now not be required.” The premise was fiscal. The conclusion swallowed a provision that had never been fiscal at all: Regulation 17(i) sat in a separate regulation and identified the counterparty rather than the taxpayer. The consultation paper does not explain what that identification was for, or what were its removal costs.

THE INSIDER TRADING DIAGNOSIS

What it costs becomes apparent when the buy-back framework is read against the PIT Regulations. Regulation 2(1)(g) defines an insider to include any person in possession of unpublished price sensitive information, and a listed company is, in respect of its own affairs, permanently in that position. Regulation 2(1)(g) speaks of "any person," and the General Clauses Act, 1897 defines "person" to include a body corporate; so treating a listed company as an insider is an interpretive extension of that language rather than something the Regulations state in terms. Regulation 4(1) prohibits an insider from trading while in possession of such information; the note to that regulation records that once possession and trading are shown, the trades are presumed to have been motivated by the information, and that the reasons for which the insider traded are not intended to be relevant. Since the March 2025 amendment aligned the definition of unpublished price sensitive information with Schedule III of the LODR Regulations, the catalogue of deemed price sensitive events has become long. Across sixty-six working days, a company of any size will pass through several of them.

The proviso to Regulation 4(1) offers a corporate insider one realistic escape: proof that the individuals in possession of the information were different from those taking the trading decision, and that adequate arrangements existed to keep the two apart. That defence was drafted for banks and broking houses, where a proprietary desk can genuinely be walled off from an advisory team. It does almost no work in a buy-back. The board that resolves upon the repurchase, fixes the maximum price, and earmarks the amount is the same organ in which the company’s unpublished price sensitive information resides. There is no second decision-maker to insulate, and a wall built around the officer who transmits the daily order cures nothing, because the parameters of that order were set by the informed body.

The framework then presses the issuer towards the very conduct the prohibition forbids. Regulation 15 of the Buy-Back Regulations requires at least seventy-five per cent of the earmarked amount to be utilised, and at least forty per cent of it within the first half of the offer period. Regulation 20(viii) forfeits up to 2.5 per cent of the earmarked amount from escrow where those floors are missed. Its carve-outs cover a volume-weighted average market price above the buy-back price and an inadequacy of sell orders; they say nothing about a company that stopped buying because it had come into possession of price sensitive information. Abstention is priced as a default. Whether an issuer that keeps buying may instead rely on the limb of the proviso covering a transaction “carried out pursuant to a statutory or regulatory obligation to carry out a bona fide transaction” has never been decided. The obligation is real but self-imposed, since it arises only because the company chose to announce the buy-back. SEBI has not said which way that cuts, and the answer governs the legality of a large class of purchases.

Against this background, the deletion of Regulation 17(i) is not housekeeping. A shareholder selling into an order that happens to be the company’s has no contemporaneous means of knowing it. Regulation 18 preserves daily reporting to the exchange and on the company’s website, but an end-of-day aggregate arrives after the price has been struck; it is a record, not a warning. In Abhijit Rajan, construing the 1992 Regulations, the Supreme Court located the mischief in the insider’s attempt to encash the benefit of the information against the person on the other side of the trade. In an open-market buy-back, that person is the company’s own shareholder, and the asymmetry is complete. Regulation 16(ii) continues to bar the company from purchasing from its promoters or persons in control through the exchange. SEBI has been careful about whom the issuer may buy from, and silent about what the issuer may know when it buys.

A COMPARATIVE BENCHMARK

Comparable regimes resolve this by exchanging discretion for pre-commitment. The comparison is apt because the EU regime confronts the identical structural problem: an issuer trading in its own shares while presumptively holding inside information, and answers it through ex ante constraint rather than the ex post discretion SEBI has retained. Article 5 of the EU Market Abuse Regulation exempts buy-back programmes from the insider dealing and manipulation prohibitions, but only on the conditions in Commission Delegated Regulation (EU) 2016/1052: full disclosure of the programme before trading begins, reporting and public disclosure of every transaction within seven market sessions, a price ceiling tied to the last independent trade, and a daily volume cap of twenty-five per cent of average daily volume. Article 4(1)(c) bars the issuer from trading while it has delayed disclosure of inside information, and Article 4(2) lifts that bar only where the programme is time-scheduled or is lead-managed by a firm that decides the timing of purchases independently of the issuer. India has taken the discretion and supplied neither the pre-commitment nor the independence.

FOUR PROPOSED REFORMS

Four changes would close the gap, none of which requires primary legislation.

First, a new Regulation 16(vii) should permit purchases through the stock exchange only under one of two execution arrangements: an irrevocable mandate filed with the designated stock exchange before the offer opens, specifying a maximum daily quantity and a price formula, and rendered incapable of amendment during the offer period; or a mandate to a registered broker exercising timing discretion independently, with no instruction from the company once the offer has opened. Both templates already exist in Indian law. Regulation 5 of the PIT Regulations, recast in 2024, allows persons perpetually in possession of price sensitive information to trade through pre-disclosed plans subject to a cooling-off period of 120 days and mandatory implementation. A buy-back is the corporate analogue of a trading plan and should be regulated as one. A company whose pre-fixed formula is overtaken by a sharp market move mid-window remains bound by the mandate for the balance of the offer period; that rigidity is the price of the safe harbour, and allowing supervening discretion once trading has opened would simply restore the UPSI-tainted flexibility the mandate is meant to remove.

Second, Regulation 20(viii) should carry an express carve-out where the shortfall is attributable to the abstention required by Regulation 4(1) of the PIT Regulations, certified by the compliance officer and disclosed on closure of the offer. A framework that fines an issuer for obeying the insider trading prohibition is indefensible. To guard against post hoc self-certification of what was in truth a discretionary decision not to buy, the compliance officer's certification should be filed with the exchange contemporaneously with the abstention, not merely disclosed on closure of the offer.

Third, a clause should be added to the proviso to Regulation 4(1) providing that purchases made in conformity with a mandate under Regulation 16(vii) do not attract the prohibition. That converts an unusable defence into a workable conditional safe harbour, gives SEBI a bright line, since departure from the mandate forfeits it, and renders the “statutory or regulatory obligation” question moot.

Fourth, by circular under Regulation 16(vi), which already empowers SEBI to specify restrictions on the placement of bids, price, and volume, exchanges should be required to disseminate at half-hourly intervals the aggregate quantity purchased by the issuer during the buy-back period, flagged as such. If the real objection to Regulation 17(i) was order-level leakage and the price impact of a visible institutional bid, an intra-day aggregate answers it. A full trading day of blindness does not. The difference from Regulation 17(i) is one of granularity, not kind: an aggregate delayed by up to thirty minutes lets the market price in the issuer's presence without exposing the order-level detail whose disclosure the 2026 amendment was designed to remove.

The 2026 amendment restored a route without restoring the conditions that made it tolerable. A safeguard removed on a tax rationale should not be allowed to leave a market integrity gap behind it, and the choice is not between disclosure and flexibility. It is between an issuer whose discretion is disciplined before the first order is placed and an issuer whose conduct is examined long afterwards by a regulator that has switched off its own clearest real-time signal. Until SEBI supplies a conditional safe harbour, every open-market buy-back will be executed under a prohibition that the issuer cannot reliably comply with and the market cannot see.