Editor’s note: This is general educational information about how an Indian securities regulation defines its terms. It is not investment advice, it does not describe any particular company, person or case, and it is based on the official sources listed at the end.
Analysis: what the drafting is actually aimed at
The structure of the definition tells you what SEBI decided the hard problem is. It is not identifying directors, who are already listed, disclosed and monitored through the trading window. It is the second ring: advisers, bankers, printers, counterparties, people in frequent communication with officers, and the households they live in. The December 06, 2024 additions of a co-partner’s firm and a person sharing a residence are the clearest signal. They target the channels through which information leaves a company without any employment relationship crossing the boundary.
The second limb, possession without connection, is what makes the regulation workable in practice and difficult in evidence. The regulations place the onus of showing that a person was in possession of or had access to the information on the person levelling the charge, after which the presumption in regulation 4 shifts the burden to the trader to demonstrate one of the exonerating circumstances. The structured digital database is the mechanism that makes those two steps meet: a contemporaneous, non-outsourced, time-stamped, eight year record of who was told what turns an argument about who could have known into a documentary question.
Two features of the June 10, 2025 expansion are worth noting for what they reveal about timing. Adding forensic audits, the arrest of an officer and the outcome of litigation to the ordinary list of price sensitive information extends the concept to events the company does not control and may learn about at the same time as everybody else, which is why the same amendment allowed the trading window to stay open for information not emanating from within the company and gave organisations 2 calendar days to enter externally sourced information into the database. The exclusion of unverified media reports from generally available information cuts the other way: a leak in the press does not make information public, so a person holding it stays inside the definition. Read together, the amendments narrow the space in which a person can claim that information had already reached the market.
What the documents say
Ask who counts as an insider under Indian law and the intuitive answer, a director or a senior executive, is the smaller half of the definition. The SEBI (Prohibition of Insider Trading) Regulations, 2015 define an insider as any person who is a connected person, or who is in possession of or has access to unpublished price sensitive information. The second limb has no requirement of employment, contract or acquaintance. A person who has the information is an insider, whatever route the information took.
Connection, defined by access rather than by title
The first limb turns on a relationship with the company. A connected person is anyone who is, or during the six months prior to the concerned act has been, associated with a company in any capacity, directly or indirectly, including by frequent communication with its officers, or through a contractual, fiduciary or employment relationship, or as a director, officer or employee, or in any professional or business position, that allows access to unpublished price sensitive information or is reasonably expected to allow such access. The words carrying the weight are association and access. A title is one way to acquire access, not the test itself.
A registered investment adviser sits on the same list for the same reason. SEBI’s own investor caution material describes an Investment Adviser as any person who, for consideration, is engaged in the business of providing investment advice to clients, and requires that person to obtain registration under the SEBI (Investment Advisers) Regulations, 2013 before giving that advice. It is the professional relationship the registration creates, not the licence itself, that can put an adviser inside the definition of a connected person if it comes with access to unpublished price sensitive information.
The regulations then list categories deemed to be connected persons unless the contrary is established. They include relatives of connected persons, holding, associate and subsidiary companies, registered intermediaries and their employees and directors, investment companies, trustee companies and asset management companies, officials of stock exchanges, clearing houses and clearing corporations, trustees and directors of mutual funds and their asset management companies, directors and employees of public financial institutions as defined in section 2 (72) of the Companies Act, 2013, officials of recognised self-regulatory organisations, and the company’s banker. The list also catches an entity, firm, trust, Hindu undivided family or association in which a director of the company, a relative of that director or the company’s banker holds more than ten per cent of the holding or interest.
An amendment with effect from December 06, 2024 widened the list at both edges. It added a firm, and any partner or employee of that firm, where a connected person is also a partner, and it added a person sharing a household or residence with a connected person. It also replaced the narrower notion of immediate relative in this list with relative, which the regulations now define as spouse, parent, sibling and child of the person and of the spouse, together with the spouses of those siblings and children. Immediate relative survives elsewhere in the regulations as a separate, tighter concept, covering a spouse, and a parent, sibling or child of the person or the spouse who is financially dependent on that person or consults them on trading decisions.
The regulations say plainly that these presumptions are rebuttable, a deeming legal fiction rather than a finding. The stated intention is to reach people who seemingly occupy no position in a company but are in regular touch with it and its officers and are in the know of its operations.
What makes information price sensitive
Unpublished price sensitive information means information relating to a company or its securities that is not generally available and which, on becoming generally available, is likely to materially affect the price of the securities. Generally available information means information accessible to the public on a non-discriminatory basis, and since an amendment effective from May 2024 it expressly excludes unverified events or information reported in print or electronic media. Information published on the website of a stock exchange would ordinarily be considered generally available.
The ordinary list runs to sixteen categories and was substantially expanded with effect from June 10, 2025. It covers financial results, dividends, changes in capital structure, mergers, de-mergers, acquisitions, delistings, disposals, business expansion and the award or termination of orders and contracts outside the normal course of business, changes in key managerial personnel other than through superannuation or end of term, the resignation of a statutory or secretarial auditor, changes in ratings other than ESG ratings, proposed fund raising, agreements that may affect management or control, fraud or default by the company, its promoter, director, key managerial personnel or subsidiary, and the arrest of any of them whether in India or abroad.
It continues into resolution plans, restructuring and one-time settlements with lenders, admission of winding-up petitions and insolvency applications, the initiation of a forensic audit and the receipt of its final report, regulatory or judicial action against the company or its officers, the outcome of litigation with an impact on the company, guarantees or indemnities given outside the normal course, and the granting, withdrawal, surrender, cancellation or suspension of key licences or approvals. For identifying these events, the regulations point to the materiality guidelines in paragraph A of Part A of Schedule III of the LODR Regulations.
The machinery around the definition
Regulation 4 prohibits an insider from trading in listed or to-be-listed securities while in possession of unpublished price sensitive information, and where a person who traded was in possession of it, the trades are presumed to have been motivated by that knowledge. The insider may then demonstrate innocence through defined circumstances, such as an off-market inter-se transfer between insiders who held the same information and each made a conscious and informed decision, or a transaction through the block deal window on the same terms. Off-market trades of that kind must be reported to the company within two working days, and the company must notify the exchange within two trading days.
Companies police the definition through a notional trading window, closed by the compliance officer when designated persons can reasonably be expected to hold such information, during which those persons and their immediate relatives may not trade. A trading restriction period applies from the end of every quarter until 48 hours after the declaration of financial results, and the regulations instruct that the gap between the audit committee clearing the accounts and the board meeting be as narrow as possible, preferably the same day, to avoid leakage.
Every organisation handling such information must maintain a structured digital database recording the nature of the information and the names and permanent account numbers of those who shared it and those with whom it was shared. The database cannot be outsourced, must sit internally with time stamping and audit trails, must record externally sourced information within 2 calendar days of receipt, and must be preserved for not less than eight years after the relevant transactions, or until any SEBI investigation or enforcement proceeding ends. Separately, promoters, promoter group members, designated persons and directors must disclose trades to the company within two trading days when the traded value exceeds ten lakh rupees in a calendar quarter, and the company must pass those particulars to the exchange within two trading days.
