SEBI (Prohibition of Insider Trading) Regulations — Connected Person and Trading Plan
SEBI (Prohibition of Insider Trading) Regulations, 2015 prohibit trading in securities of a company by persons in possession of unpublished price-sensitive information (UPSI), define the concept of a connected person and insider, and permit structured trading plans as an exception for designated persons.
The SEBI (Prohibition of Insider Trading) Regulations 2015 (PIT Regulations) replaced the 1992 Insider Trading Regulations and introduced a more nuanced and comprehensive anti-insider trading framework aligned with international best practices. The regulations apply to all securities of listed companies and cover a wide range of market participants.
The term connected person is defined broadly under Regulation 2(1)(d) to include any person who is or has been associated with the company in any capacity — as a director, employee, auditor, key managerial personnel, banker, or any other professional capacity — during the six months preceding a transaction. A deemed connected person is one presumed to have access to UPSI by virtue of their relationship with the company, and the burden of rebuttal lies on them to demonstrate they were not in possession of UPSI.
Unpublished price-sensitive information (UPSI) is defined as any information related to the company or its securities that is not generally available and which, upon becoming generally available, would be likely to materially affect the price of securities. Specific examples include financial results, dividends, changes in capital structure, mergers and acquisitions, key managerial changes, and material litigation outcomes.
The trading plan mechanism introduced under Regulation 5 provides a structured exception for insiders — particularly promoters and senior executives — who may routinely be in possession of UPSI and need to monetise their holdings. A trading plan must be pre-approved by the Compliance Officer, disclosed to the stock exchange, and cannot commence execution until at least six months after approval. The plan must specify the number of securities, price range, and time period for transactions, and once activated, the insider cannot deviate from it.
Listed companies are required to maintain a Structured Digital Database (SDD) of all persons who receive UPSI, with timestamps and access logs, as a primary audit trail for insider trading investigations. The regulations also mandate trading window closures before material financial results announcements and prescribe pre-clearance requirements for all trades by designated persons above specified thresholds. SEBI has consistently used the PIT Regulations as the primary instrument for investigating and prosecuting market manipulation involving corporate insiders.