Beyond Listing Bell: What Directors and KMPs Must Know About PIT Compliance

Summary: The Company and every Director, Key Managerial Personnel, employee and connected person will, for the first time, come under the direct discipline of SEBI’s regulatory framework for listed entities, most immediately the SEBI (Prohibition of Insider Trading) Regulations, 2015, as amended (“PIT Regulations”). Listing is a transition to continuous public accountability, with the Company becoming subject to multiple regulations simultaneously, including the SEBI LODR Regulations, PIT Regulations, SAST Regulations, ICDR Regulations and the Companies Act, 2013. The PIT framework imposes obligations concerning insiders, connected persons, Unpublished Price Sensitive Information (UPSI), Designated Persons, trading plans, trading-window closures, pre-clearance, contra-trade restrictions, disclosures, Codes of Conduct and Fair Disclosure, Compliance Officer responsibilities and the Structured Digital Database. The note also addresses the 2025 amendment, which expanded the illustrative UPSI framework and introduced specific treatment for UPSI originating outside the listed entity, as well as the earlier 2024 trading-plan changes reducing the cooling-off period to 120 calendar days and removing the earlier minimum plan-coverage requirement. The practical do’s and don’ts, FAQs and immediate management action points are intended to assist newly listed companies in aligning their internal framework from the listing date itself. This note is a generic template intended for use with any newly listed client — bracketed fields should be completed, and Company-specific thresholds/timelines finalised with the Compliance Officer, before circulation. It does not substitute for the Company’s Board-approved Codes or for legal advice on specific transactions.

1. Why Listed-Company Compliance Matters

Listing is a transition, not a one-time event — the Company moves from private, promoter-driven governance to continuous public accountability. Compliance is not a formality layered on top of the business; it is the price of access to public capital, and the Board and management carry personal, not just corporate, responsibility for it. Key reasons this matters from Day One:

• Investor trust and cost of capital: A consistent compliance record supports valuation, analyst coverage, and the Company’s ability to raise further capital on favourable terms. A single governance lapse can permanently dent that trust, especially for a recently listed company still establishing its market reputation.
• Multiplicity of regulations applies simultaneously: On listing, the Company becomes subject to an entire regulatory stack at once — the SEBI LODR Regulations (continuous disclosure, corporate governance, Board/Committee composition), the PIT Regulations (insider trading), the SAST Regulations (takeover triggers on shareholding changes), the ICDR Regulations (any further issue of capital), and the Companies Act, 2013 — all running in parallel with overlapping timelines.
• Personal liability of Directors and KMPs: SEBI’s enforcement regime attaches personal monetary penalty, disgorgement and debarment to Directors, KMPs and “officers in default”, independent of the Company’s own liability. Being unaware of a requirement is not a defence.
• Real-time, not periodic, scrutiny: Stock price and trading volumes react to information in real time; regulators, exchanges, analysts and shareholders now watch the Company continuously, not just at year-end. Delayed or inaccurate disclosure is itself a violation, regardless of intent.
• Cost of non-compliance is severe and public: Adjudication orders, penalties and exchange actions are published and searchable, and compound reputational damage well beyond the monetary penalty itself — a material concern for a company still building its post-listing track record.

The remainder of this note focuses on the PIT Regulations specifically, as they carry the most immediate and personal exposure for Directors, KMPs and employees from the very first day of listing.

2. Core Concepts under the PIT Regulations

• Insider: Any person who is (a) a “connected person”, or (b) in possession of or having access to Unpublished Price Sensitive Information (UPSI), regardless of how that access arose.
• Connected Person: A very wide category — includes Directors, employees, and any person who has a contractual, fiduciary or employment relationship with the Company (auditors, legal advisors, bankers, consultants, etc.) that allows access to UPSI, and their immediate relatives. The onus is on the connected person to prove he/she was NOT in possession of UPSI when trading — a reverse burden of proof.
• Unpublished Price Sensitive Information (UPSI): Any information, directly or indirectly relating to the Company, which is not generally available and which upon becoming generally available is likely to materially affect the price of securities. Regulation 2(1)(n) gives an illustrative (not exhaustive) list — financial results, dividends, change in capital structure, mergers/acquisitions/de-mergers, change in key managerial personnel, and material events under Regulation 30 of the LODR Regulations (as further expanded by the 2025 amendment — see Section 5 below).
• Designated Persons (DPs): A category identified by the Board/Audit Committee (typically Directors, KMPs, employees up to a specified level, and persons in departments with regular UPSI access — finance, accounts, legal, secretarial, M&A, etc.) who are subject to enhanced restrictions: trading window closure, pre-clearance, holding period, and periodic disclosures.
• Trading Plan: A pre-committed, SEBI-compliant plan of trades that a Designated Person may set up in advance (approved by the Compliance Officer) which, once formulated and publicly disclosed, allows trading even during a closed trading window or while in possession of UPSI — since the decision to trade was made before the UPSI arose. Trading Plan under SEBI Insider Trading Regulations

3. Trading Window Closure — What Management Must Know

The “trading window” is the period during which Designated Persons and their immediate relatives are permitted to trade in the Company’s securities. It must be closed by the Compliance Officer whenever a Designated Person is reasonably expected to have access to, or is in possession of, UPSI.

3.1 When the window is ordinarily closed

• Before and during preparation/finalisation of quarterly, half-yearly and annual financial results, until 48 hours after the information becomes generally available (i.e., after filing with the stock exchanges).
• During declaration of dividends (interim/final), buyback, bonus, rights issue, or other capital restructuring proposals, until public disclosure.
• During any proposed merger, demerger, acquisition, de-listing, disposal or expansion of business, until made public.
• On changes in key managerial personnel, and other material events as may be determined by the Compliance Officer to be price sensitive.

3.2 Restrictions during closure

• No Designated Person or immediate relative may trade (buy or sell) in the Company’s securities, or execute a trade in derivatives on the Company’s securities, while the window is closed.
• The minimum trading window closure period for financial results is typically from the end of the quarter/year until 48 hours after the results are disclosed to the stock exchanges — the Company’s own Code should specify the exact mechanics.
• Even outside a formally “closed” window, no Designated Person may trade while actually in possession of UPSI — the general prohibition under Regulation 4 always overrides window status.

3.3 Pre-clearance and reporting

• Where the Company’s Code prescribes a threshold (commonly trades above a specified value, e.g., ₹10 lakh in a calendar quarter), Designated Persons must obtain prior written pre-clearance from the Compliance Officer before trading, even when the window is open.
• A minimum six-month holding period typically applies to trades by Designated Persons (contra-trade restriction) — no opposite trade (buy after sell, or sell after buy) is permitted within six months, subject to the Code’s exemptions.
• All trades by Designated Persons and immediate relatives, above the prescribed threshold, must be disclosed to the Company within two trading days, and the Company must notify the stock exchanges within two trading days of receipt.

4. Company-level Compliance Framework Required Immediately

• Code of Conduct (Regulation 9): The Board must adopt a Code of Conduct to Regulate, Monitor and Report Trading by Designated Persons, formulated by the Compliance Officer and approved by the Board, covering trading window closure, pre-clearance, contra-trade restrictions and the list of Designated Persons. Regulation 9
• Code of Fair Disclosure (Regulation 8): A separate Board-approved Code of Practices and Procedures for Fair Disclosure of UPSI must be adopted and published on the Company’s website, ensuring prompt, uniform and universal dissemination of UPSI. Regulation 8
• Compliance Officer: A senior officer (typically the Company Secretary) must be designated as Compliance Officer, reporting to the Board/Audit Committee, responsible for administering the Code, maintaining records, closing/opening the trading window, granting pre-clearance, and approving trading plans.
• Structured Digital Database (SDD) (Regulation 3(5)): A time-stamped, audit-trail enabled digital database must be maintained internally (not outsourced, non-tamperable) recording the names of persons/entities with whom UPSI is shared, along with the nature of UPSI. This is now a heavily scrutinised area in SEBI inspections. Regulation 3
• List of Designated Persons & Insiders: To be identified, documented and kept current, with periodic (at least annual) reconciliation, and immediate updation on change in role/access.
• Initial and Continual Disclosures (Regulation 7): Promoters, Directors and KMPs must disclose their holdings within specified timelines from listing (initial disclosure) and thereafter disclose changes in holding beyond the prescribed threshold within two trading days (continual disclosure); the Company must further notify the stock exchange. Regulation 7

5. Recent Regulatory Development — 2025 Amendment (Effective 10th June, 2025)

SEBI notified the SEBI (Prohibition of Insider Trading) (Amendment) Regulations, 2025 on 12th March, 2025 (effective 90 days thereafter, i.e., 10th June, 2025). Any company listing after this date must ensure its Code is drafted/aligned to the amended framework from inception. Key changes:

• (a) Expanded definition of UPSI: The illustrative list of UPSI has been widened to specifically include: (i) decisions regarding proposed fund-raising; (ii) agreements that may impact management or control of the Company; (iii) initiation of a forensic audit and receipt of the final forensic audit report; (iv) guarantees, indemnities or surety given for third parties outside the normal course of business; (v) grant, withdrawal, surrender, cancellation or suspension of key licences/regulatory approvals; (vi) admission of a winding-up petition or CIRP application (and approval/rejection of a resolution plan) under the IBC; and (vii) outcome of material litigation/disputes and regulatory or judicial action against the Company, its Directors, KMPs, promoters or subsidiaries.
• (b) Materiality alignment with LODR: These events are to be assessed as UPSI using the same materiality principles prescribed under Regulation 30 and Schedule III of the SEBI LODR Regulations, 2015 — reinforcing the need for the secretarial/compliance team to jointly evaluate every Regulation 30 disclosure for both LODR materiality and PIT/UPSI classification.
• (c) Relief for UPSI originating outside the Company: Where UPSI originates from outside the listed entity (e.g., a regulatory order, a third-party litigation development, or external market information), the trading window is no longer mandatorily required to be closed for Designated Persons on that account, provided the information is entered in the Structured Digital Database within two days of receipt — giving the Company some flexibility while still requiring timely SDD capture.

Separately, an earlier 2024 amendment eased the trading-plan framework: the cooling-off period before a trading plan can commence was reduced from six months to 120 calendar days, the earlier requirement of a minimum 12-month plan coverage was removed, and the Compliance Officer must approve/reject a trading plan within two trading days and notify the exchanges on the day of approval. SEBI Insider Trading 2024 amendments

6. Practical Do’s and Don’ts for Directors, KMPs and Employees

• Do treat every piece of unpublished, price-sensitive information about the Company — financial, commercial, legal or regulatory — as confidential until it is formally disclosed to the stock exchanges.
• Do check the trading window status with the Compliance Officer and obtain pre-clearance (where applicable) before executing any trade in the Company’s securities.
• Do promptly disclose your shareholding and subsequent trades to the Compliance Officer within the timelines prescribed in the Code.
• Do route any need to share UPSI (with auditors, lenders, advisors, potential investors) only on a “need-to-know” basis and ensure it is logged in the Structured Digital Database.
• Don’t trade, tip-off, or advise any other person to trade in the Company’s securities while in possession of UPSI — even if the trading window is technically open.
• Don’t communicate UPSI to family members, friends, brokers or any third party except in furtherance of legitimate purposes, performance of duties or discharge of legal obligations.
• Don’t assume derivatives, off-market transfers, gifts, or transactions by immediate relatives are outside scope — most are equally covered.

7. Frequently Asked Questions (FAQ)

8. Immediate Action Points for Management

This note is a generic template intended purely as a management briefing on the broad importance of listed-company compliance and the SEBI PIT Regulations (including the March 2025 amendment), and does not constitute legal advice. It should be customised with the specific company’s name, listing date, exchange(s) and financial year before circulation. The Company’s specific Code of Conduct, thresholds, and internal procedures should be finalised and adopted by the Board on the recommendation of the Compliance Officer, with reference to the full text of the Regulations and applicable SEBI circulars/FAQs.

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Author: CS Ronak Jhuthawat | Company Secretary | Partner, Ronak Jhuthawat & Co. | [[email protected]] | Mobile, 9887422212