SEBI Insider Trading Regulations explained: this guide covers what SEBI Insider Trading Regulations means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
SEBI (Prohibition of Insider Trading) Regulations 2015 (PIT Regulations) prohibit trading by insiders in securities of listed companies while in possession of Unpublished Price Sensitive Information (UPSI). The regulations impose extensive disclosure and compliance obligations on listed companies and designated persons.
Key Definitions
| Term | Definition |
|---|---|
| Insider | Connected person or any person in possession of UPSI |
| Connected Person | Director, KMP, employee, or any person having frequent communication with company for preceding 6 months |
| UPSI | Information relating to company, not generally available, which upon becoming available would materially affect price of securities |
| Designated Person | Persons designated by company as likely to have access to UPSI (directors, officers, key employees) |
Examples of UPSI
UPSI includes but is not limited to:
- Quarterly/annual financial results
- Dividends (including interim dividends)
- Change in capital structure (rights/bonus issue, buyback)
- Mergers, acquisitions, demergers
- Change in directors or KMP
- Material contracts or litigations
- Launch/discontinuation of major products
- Major policy decisions or regulatory actions
Trading Window Closure
Companies must close the trading window (prohibit trading by designated persons) when UPSI is created:
- Window closes when UPSI comes into existence
- Minimum closure period: before Board meeting to announce quarterly results
- Window reopens: 48 hours after publication/announcement of UPSI
- Company's Code of Conduct prescribes specific calendar (e.g., window closed from 1 April to 48 hours after Q4 results)
Pre-Clearance Procedure
Designated persons wishing to trade during open window must obtain pre-clearance from the Compliance Officer if trade value exceeds Rs.10 lakh (or lower threshold as per company policy):
- Designated person applies to Compliance Officer
- Confirms not in possession of UPSI
- Compliance Officer approves/rejects within specified time
- Trade must be executed within 7 trading days of pre-clearance approval
- Within 2 trading days of completing trade, designated person must report trade details
Structured Digital Database (SDD)
Companies must maintain a digital database of all persons (internal and external) who have access to UPSI:
- Names and PAN of all persons who have received UPSI
- Purpose for which UPSI was shared
- Date of sharing and expected date of making UPSI public
- Database must be maintained for 8 years
- Confidentiality of database must be maintained
Disclosure Requirements
| Disclosure Type | Who | Timeline |
|---|---|---|
| Initial disclosure (Section 7(1)(a)) | Promoters, directors, KMP | On appointment or within 30 days of these regulations becoming applicable |
| Continual disclosure | Promoters, directors, KMP holding 1% or more | Within 2 trading days of trade |
| Disclosure by person above 2% threshold | Any person crossing 2% holding after trading | Within 2 trading days of trade |
Defenses Available to Insiders
Regulations provide certain defenses for insider trading allegations:
- Off-market transactions between promoters with full disclosure to stock exchange
- Transactions pursuant to statutory obligations or as per court/regulatory orders
- Pre-arranged trading plan (filed with compliance officer and stock exchange before execution)
- ESOPs granted by company (not secondary market)
Penalties
SEBI can impose civil and criminal penalties:
- Civil penalty: Up to Rs.25 crore or three times the profit made from insider trading, whichever is higher
- Criminal penalty: Imprisonment up to 10 years and/or fine up to Rs.25 crore under Section 24 of SEBI Act
- Disgorgement: Ill-gotten gains required to be disgorged
- Market ban: SEBI can debar insiders from participating in capital markets