Definition
Trading Plan (PIT)
A trading plan is a pre-disclosed schedule that lets insiders trade in their company's shares even while possessing UPSI, under SEBI safeguards.
Under SEBI's PIT Regulations, an insider can formulate a trading plan, get it approved by the compliance officer and disclose it publicly, after which trades executed strictly per the plan are exempt from the insider-trading prohibition. SEBI has revised the framework to make plans more usable, including timelines for the cool-off period and execution.
The rationale is that pre-committing to trades, well in advance and irrespective of future information, removes the ability to exploit UPSI. Trading plans are mainly used by promoters and senior executives to sell shares in a compliant way.
Related terms
- SEBI Insider Trading Code (PIT)The SEBI (Prohibition of Insider Trading) Regulations, or PIT, ban trading in a company's securities while in possession of unpublished price-sensitive information.
- Unpublished Price-Sensitive Information (UPSI)UPSI is non-public information about a company that, once known, could materially affect the price of its securities.
- Trading WindowThe trading window is the period during which a company's insiders are permitted to trade its shares; it is closed when UPSI exists.
Plain-English explainer from The Dispatch Investors Encyclopedia. General information, not financial advice.