This is an educational explainer about how securities market regulations generally function. It is not investment advice and does not describe any specific company, security, or current event.
A company’s chartered accountant, its outside legal counsel, and even a director’s spouse can all be legally classified as “insiders” under Indian securities law, despite never holding a job title at the firm or sitting through a single board meeting. That may sound like an unusually broad net for a rule most people associate with corporate executives trading ahead of bad news. But the Securities and Exchange Board of India (SEBI) built its insider trading regulations around a different question entirely: not who someone is, but what information they can access and how they got it.
The Core Test Is Access, Not Title
SEBI’s Prohibition of Insider Trading Regulations define an “insider” as anyone who is a “connected person” or who otherwise possesses unpublished price sensitive information (UPSI), regardless of formal position. UPSI generally covers information that is not yet public and that could materially affect a company’s share price if it were disclosed, things like unreleased financial results, a pending fundraising decision, or a significant change in the business. The regulation deliberately does not list job titles as the qualifying criterion. Instead, it asks whether a person had, or reasonably could have had, access to such information because of a connection with the company.
This design choice matters because price sensitive information routinely flows well outside the executive suite. It passes through statutory auditors preparing financial statements, investment bankers structuring a transaction, law firms drafting disclosure documents, IT vendors managing internal systems, and public relations consultants preparing announcements. Under a title-based definition, none of these people would be covered even though each may know material facts before the market does. SEBI’s access-based definition closes that gap by treating the flow of information, not the org chart, as the relevant boundary.
“Connected Persons” and the Relatives Clause
The regulations formalize this through the category of “connected persons,” which includes people with a direct professional or business relationship to the company, such as employees, directors, and their firms, as well as anyone who has had a contractual, fiduciary, or employment relationship with the company within a defined recent period. Auditors, accountancy firms, law firms, analysts, consultants, and merchant bankers engaged by the company typically fall into this bracket, since their work routinely requires access to confidential corporate data.
The rules extend further through what is often called the “deemed connected persons” and immediate relatives provisions. Immediate relatives of connected persons, spouses, parents, siblings, and children who are financially dependent or share a household, are presumed to have potential access to the same UPSI unless that presumption is rebutted. This is not because family members are assumed to misuse information, but because shared households and financial ties create a realistic channel through which sensitive details can pass informally, at a dinner table rather than a boardroom.
Why Companies Also Define “Designated Persons”
Because the statutory definition is broad and access-driven, listed companies are required to maintain their own internal list of “designated persons,” a practical mechanism for applying the regulation day to day. This typically includes senior management, employees in finance, legal, and strategy functions, and any external party with structured access to UPSI, such as auditors or advisors working on a live transaction. Designated persons face specific obligations, including trading window restrictions around results announcements and disclosure requirements for their trades.
The broader lesson is structural rather than punitive: modern securities regulation recognizes that material information rarely stays confined to a management hierarchy. By anchoring the definition of “insider” to access and connection rather than title, SEBI’s framework aims to cover the realistic pathways through which price sensitive information can leak into trading decisions, wherever in or around a company those pathways happen to run.
