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The Securities and Exchange Board of India (Sebi) is proposing a significant expansion to the list of individuals classified as “connected persons” under the Sebi (Prohibition of Insider Trading) Regulations (PIT Regulations). The move aims to enhance the scope of insider trading regulations by including a broader range of relatives and other entities.
Currently, the definition of “connected persons” encompasses individuals who might have access, either directly or indirectly, to unpublished price-sensitive information (UPSI) due to their employment or professional relationships, as well as their immediate relatives such as parents, siblings, and children. The proposed amendment seeks to extend this definition to include additional categories of relatives, thus tightening the regulatory framework around insider trading.
According to the consultation paper dated July 29, Sebi plans to amend regulation 2(1)(d), which defines connected persons. The revision will replace the term “immediate relative” with “relative,” thereby broadening the scope to include siblings of a spouse, siblings of parents, any lineal ascendants or descendants, and their spouses. While the definition of “immediate relative” under regulation 2(1)(f) will remain unchanged and will continue to pertain to disclosures and codes of conduct under the PIT Regulations, the expanded definition aims to capture a wider network of individuals who might influence or be influenced by access to UPSI.
Additionally, Sebi has suggested incorporating six new categories of connected persons. These include a firm or its employees in which a connected person is also a partner, any individual on whose advice or instructions a connected person regularly acts, and a body corporate whose board members follow the advice of a connected person. The proposal also includes individuals sharing a residence with a connected person, those with significant financial relationships with a connected person, and Hindu Undivided Families (HUFs) where the Karta or any member is a connected person.