Sebi Proposes Changes to Insider Trading Rules

New Delhi, Jul 29 (PTI) Capital markets regulator Sebi on Monday proposed changes to the definition of connected person and relative under the scope of insider trading rules.

Additionally, the regulator has suggested removing the "Note" from the definition of "immediate relative".

In its consultation paper, Sebi said it aims to keep the definition of 'immediate relative' in the PIT (Prohibition of Insider Trading) Regulations to avoid increasing compliance requirements.

The existing requirements for disclosures by promoters, directors, and designated persons about their immediate relatives will remain unchanged, it added.

"In order to ensure that there is no increase in compliance requirements, the definition of 'immediate relative'...is proposed to be retained in the PIT Regulations," Sebi said.

After the proposed changes, the relevance of the term "immediate relative" would be limited to disclosures and code of conduct, and no additional requirements for disclosures are being introduced under PIT Regulations, it added.

The Securities and Exchange Board of India (Sebi) has sought comments from the public till August 18 on the proposals.

Under the insider trading rules, a 'connected person' is someone with access to Unpublished Price Sensitive Information (UPSI) due to their connection to the company.

The rules also identify certain individuals as 'deemed connected persons', who, although not formally part of the company, have regular contact with it, potentially giving them access to UPSI.

Now, Sebi is looking to include people who, because of their close relationship with a connected person, could potentially engage in insider trading.

The proposed changes will replace 'immediate relative' with 'relative' and add more categories of 'deemed connected persons,' such as relatives of connected persons and firms or partners/employees where a connected person is also a partner -- and persons who influence connected persons through advice, directions, or instructions.

Additionally, the regulator has suggested that corporations where directors act on the advice of a connected person, individuals living with a connected person, people with a material financial relationship with a connected person and members of a Hindu Undivided Family (HUF) where a connected person is the Karta or a member should come under the definition of connected person.

If these deemed connected persons are charged under the PIT Regulations, they must prove they were not in possession of UPSI.