SEBI (Prohibition of Insider Trading) Regulations 2015
The SEBI (Prohibition of Insider Trading) Regulations 2015 establish the comprehensive legal framework to prevent trading in securities of listed companies by persons who have access to unpublished price sensitive information, replacing the earlier 1992 regulations with more modern and extensive provisions.
The SEBI (Prohibition of Insider Trading) Regulations 2015 (PIT Regulations) came into force on 15 May 2015 and represented a significant overhaul of India's insider trading regime. They were drafted on the recommendations of the Justice N K Sodhi committee and drew from global regulatory best practices, particularly the US Securities and Exchange Commission's rules and the UK Financial Conduct Authority's market abuse framework.
The central prohibition under Regulation 4 bars any insider from trading in securities of a company when in possession of Unpublished Price Sensitive Information (UPSI). The PIT Regulations expanded the definition of UPSI to include financial results, dividends, changes in capital structure, mergers, delistings, disposals, and other developments that are generally undisclosed and would materially affect the price if known.
The concept of connected persons was broadened. Connected persons include all officers, employees, immediate relatives, and any person who by virtue of their position or connection with the company has access to UPSI. A person deemed to be a connected person carries a rebuttable presumption that they were in possession of UPSI for the six months preceding the trading, placing the burden of proof on the accused.
The PIT Regulations introduced the concept of Structured Digital Databases (SDD) as a record-keeping mechanism. Companies and market intermediaries were mandated to maintain a digital database of all persons with whom UPSI was shared, with timestamps and identifiers.
A notable feature of the 2015 regulations was the introduction of a legitimate purpose exception: sharing UPSI for legitimate business purposes (such as due diligence in M&A transactions) with appropriate confidentiality and awareness obligations was permitted.
SEBI enhanced the PIT Regulations through several amendments in 2018 and 2019, tightening disclosure obligations and expanding the scope of prohibited conduct. The 2018 amendment mandated formulation of written codes of fair disclosure by all listed entities.