Who is a designated person under PIT Regulations?

A designated person is identified by the listed company under Regulation 9(4) of the PIT Regulations and includes promoters, members of the promoter group, the chief executive officer, employees up to two levels below the CEO, employees of material subsidiaries, employees with regular access to UPSI, and others as the board may designate. Designated persons are subject to the code of conduct, the trading window restrictions, and the disclosure requirements under Regulation 7.

What is a trading plan under Regulation 5A?

Regulation 5A allows an insider in continuous possession of UPSI to trade in the company's securities through a pre-cleared trading plan submitted to and approved by the compliance officer. The plan must be for a minimum period of twelve months, must commence not earlier than the 121st day after public disclosure of the plan, and must specify the value or number of securities, the nature of the trade, and the proposed dates. Once approved, the insider must trade strictly in accordance with the plan and cannot deviate.

What is the structured digital database under Regulation 3?

The structured digital database is a tamper-evident, time-stamped digital log maintained by the listed company under Regulation 3(5) of the PIT Regulations. It captures the nature of the UPSI, the date and time of sharing, the names and PANs of the persons with whom the UPSI was shared, and the legitimate purpose for sharing. The database must be retained for a minimum of eight years and produced to SEBI on demand.

What are the penalties for insider trading?

Section 15G of the SEBI Act provides a monetary penalty of up to twenty-five crore rupees or three times the profit made out of insider trading, whichever is higher. Section 24 of the SEBI Act provides for imprisonment up to ten years and fine up to twenty-five crore rupees. SEBI also has powers to disgorge profits, debar the insider from the securities market, and freeze the proceeds of the trade.

SEBI PIT Regulations and Regulation 9 Trading Plans: The UPSI Definition, the Designated Person Workflow, and the Compliance Architecture Every Listed Issuer Must Run

Q: What is UPSI under SEBI PIT Regulations?

Unpublished Price Sensitive Information is defined under Regulation 2(1)(n) of the SEBI (Prohibition of Insider Trading) Regulations, 2015 as any information, relating to a company or its securities, directly or indirectly, that is not generally available which upon becoming generally available, is likely to materially affect the price of the securities. The Regulations list six categories that are deemed UPSI, financial results, dividends, change in capital structure, mergers and acquisitions, changes in key managerial personnel, and material events under SEBI LODR Regulation 30.

Abstract

The SEBI (Prohibition of Insider Trading) Regulations, 2015 establish the legal and operational framework that prevents trading in listed securities on the basis of Unpublished Price Sensitive Information. The Regulations define UPSI, identify the universe of insiders and designated persons, prescribe a code of conduct for listed companies under Regulation 9, govern the trading window and pre-clearance regime, and provide a Regulation 5A trading plan route for insiders in continuous possession of UPSI. SEBI enforces the Regulations through investigation, adjudication, and the criminal route under Section 24 of the SEBI Act. This article walks through the legislative architecture, the UPSI scope, the designated person framework, the structured digital database under Regulation 3, the Regulation 9 code of conduct, and the trading plan workflow under Regulation 5A.

Introduction

The Indian insider trading regime traces back to the 1992 SEBI (Insider Trading) Regulations, but the current architecture is the 2015 revision, the SEBI (Prohibition of Insider Trading) Regulations, 2015. The 2015 Regulations replaced the prior framework and introduced a more rigorous structure around the definition of UPSI, the identification of designated persons, the trading window regime, and the code of conduct obligations on listed companies.

The Regulations have been amended several times, with material changes in 2018 (introduction of the structured digital database), 2019 (refinement of the legitimate purpose test for UPSI sharing), and subsequent rounds covering the trading plan flexibility, the contra-trade rule, and the disclosure thresholds.

The combined effect is that listed Indian companies operate a sophisticated compliance architecture across the trading window, the pre-clearance protocol, the structured digital database, and the periodic disclosures. The compliance burden is concentrated at the company secretary and compliance officer level, but the substantive exposure is on the board and the senior management who hold and trade in the company's securities.

This article walks through the architecture.

The legislative framework

Regulation 2(1)(n): UPSI definition. UPSI is any information relating to a company or its securities, directly or indirectly, that is not generally available which upon becoming generally available, is likely to materially affect the price of the securities. The Regulations enumerate six deemed UPSI categories: financial results, dividends, change in capital structure, mergers, demergers, acquisitions, delistings, disposals and expansions of business and such other transactions, changes in key managerial personnel, and material events in accordance with Regulation 30 of the SEBI LODR Regulations.

Regulation 2(1)(g): Insider. An insider is any person who is a connected person or in possession of or having access to UPSI. The dual test means that even an outsider who possesses UPSI is an insider for the purposes of the Regulations.

Regulation 2(1)(d): Connected person. A connected person is any person who is or has during the six months prior to the concerned act been associated with a company, directly or indirectly, in any capacity that allows access to UPSI. The Regulation lists ten categories of deemed connected persons including immediate relatives, holding and subsidiary companies, intermediaries, bankers, and auditors.

Regulation 3: Communication or procurement of UPSI. Regulation 3(1) prohibits the communication of UPSI except where required for legitimate purposes, performance of duties, or discharge of legal obligations. Regulation 3(5) requires the listed company to maintain a structured digital database of UPSI sharing.

Regulation 4: Trading by insiders. Regulation 4(1) prohibits trading by an insider when in possession of UPSI. Regulation 4(2) provides defences including the trading plan defence under Regulation 5A.

The UPSI definition in practice

The UPSI definition is fact-specific and context-dependent. The six deemed UPSI categories are clear, financial results, dividends, capital structure changes, M&A, KMP changes, and material events. Beyond the deemed list, the catch-all language of any information likely to materially affect the price of securities is broad.

KAMRIT's practical guidance for listed clients is to treat the following as UPSI by default and run them through the structured digital database protocol:

Quarterly and annual financial results from the date of preparation until publication
Board agenda items relating to dividends, bonus issues, splits, buybacks
M&A negotiations from the date of LOI or term sheet
Material litigation and regulatory action that is not in the public domain
Significant customer wins or losses that would change the revenue trajectory materially
Changes in CEO, CFO, or material business unit heads before the announcement
Material covenant breaches or restructuring discussions with lenders
Audit qualifications or going concern issues before the audit report is released

The designated person framework

Regulation 9 requires the listed company to identify designated persons and bring them within the code of conduct. The categories include:

Promoters and members of the promoter group
The CEO and employees up to two levels below the CEO
The CFO and employees with regular access to financial information
Employees of material subsidiaries
Other employees as the board may designate based on their access to UPSI
The auditor, the company secretary, and intermediaries who hold UPSI in the course of their professional engagement

Designated persons are subject to:

The trading window restrictions, where the trading window is closed during the period of UPSI accumulation, typically from the end of the quarter until 48 hours after the financial results publication
The pre-clearance regime, where any trade above a threshold value, typically ten lakh rupees, requires pre-clearance from the compliance officer
The contra-trade rule, where the designated person cannot execute a contra-trade within six months of the original trade
The disclosure requirements under Regulation 7, including initial disclosures on appointment and continuing disclosures of trades above ten lakh rupees value in any calendar quarter

The Regulation 5A trading plan

Regulation 5A is the safe-harbour route for insiders in continuous possession of UPSI, typically the CEO and CFO who are perpetually aware of financial trajectory and strategic developments. The trading plan allows these insiders to pre-commit to a series of trades and execute them notwithstanding their continuous UPSI possession.

The trading plan must:

Be submitted to and approved by the compliance officer
Be publicly disclosed by the listed company
Commence not earlier than the 121st day after public disclosure
Run for a minimum of twelve months
Specify the value, the number of securities, the nature of the trade (buy or sell), and the proposed dates with reasonable specificity
Not entail trading during the period from the 21st day prior to the end of the financial period to the second trading day after the financial results disclosure

Once approved, the insider must trade strictly in accordance with the plan and cannot deviate or cancel except in narrowly defined circumstances.

The structured digital database

Regulation 3(5) requires the listed company to maintain a structured digital database that captures every instance of UPSI sharing. The database must be:

Tamper-evident, with no ability to back-edit entries
Time-stamped at the entry level
Maintained internally on the company's servers and not on an external SaaS platform
Capable of capturing the nature of UPSI, the date and time of sharing, the names and PANs of recipients, and the legitimate purpose
Retained for a minimum of eight years
Produced to SEBI on demand

A common compliance gap is the absence of a contemporaneous database entry, where the company logs UPSI sharing retrospectively after a SEBI inspection or investigation has commenced. SEBI has imposed monetary penalties for retrospective entries and for absence of legitimate purpose documentation.

Talk to KAMRIT

KAMRIT advises listed issuers on the full PIT Regulations compliance architecture, including the structured digital database setup, the designated person framework, the code of conduct drafting under Regulation 9, the trading plan workflow under Regulation 5A, and the disclosure cycle under Regulation 7. Talk to KAMRIT to run a PIT health check on your insider trading compliance and identify the gaps before SEBI does.

References

SEBI (Prohibition of Insider Trading) Regulations, 2015.
SEBI Act, 1992, Sections 15G and 24.
SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, Regulation 30.
SEBI Adjudication Orders on insider trading enforcement.
SEBI Master Circular on PIT Regulations compliance.