Summary: Under the SEBI (Prohibition of Insider Trading) Regulations, 2015, a person can be an “insider” through two independent routes: by being a connected person or by possessing or having access to unpublished price sensitive information (UPSI). The distinction assumes particular importance in acquisitions, mergers and open offers where the relevant UPSI may originate from an acquirer or investor rather than the listed target company. The SEBI order in the matter of Religare Enterprises Limited illustrates this distinction. SEBI observed that UPSI concerning the impending open offer originated from the Burman Group, the acquirer, rather than REL. The noticee’s position as Executive Chairperson and key managerial personnel of REL was not, by itself, treated as sufficient to make her a connected person in relation to that particular UPSI. Nevertheless, she was held to be an insider under the second limb of Regulation 2(1)(g) on the basis of possession of UPSI. The classification also affects the evidentiary burden under Regulation 4(2): for a connected person, the onus of establishing absence of possession lies on that person, while in other cases SEBI bears the onus of establishing possession. Thus, a person who is neither a connected person nor a designated person may still qualify as an insider if possession of, or access to, the specific UPSI is established.
The core question
Can a person escape classification as a “connected person” and still be held to be an “insider”?
Under the SEBI (Prohibition of Insider Trading) Regulations, 2015 (“PIT Regulations”), insider status is not only confined to designation, employment or formal association with a listed company. A person who is not a connected person may nevertheless be an insider if SEBI establishes that the person possessed, or had access to, unpublished price sensitive information (“UPSI”).
This raises an interesting question in the context of acquisitions and open offers: Where UPSI originates from an acquirer rather than the listed target company, can a person who has access to such information be classified as a connected person, an insider, or both?
Two independent routes to insider status
The distinction flows from the structure of the PIT Regulations. Regulation 2(1)(g) defines an “insider” through two independent limbs: (i) a connected person; or (ii) a person who is in possession of, or has access to, UPSI. Regulation 2(1)(d), in turn, identifies a “connected person” by reference to an association with a company that allows, or is reasonably expected to allow, access to UPSI.
When UPSI originates outside the listed company!
In an open offer, strategic acquisition, merger or investor-led transaction, UPSI may originate from an acquirer, investor rather than the listed company itself.
A person’s employment or position in the listed target company does not automatically establish that the person was associated with the source of the UPSI in a manner that allowed, or was reasonably expected to allow, access to that information.
The connected-person enquiry must therefore be examined considering the specific facts and the association through which access to the particular UPSI is alleged.
The SEBI order in the matter of Religare Enterprises Limited (“Religare order”) [1] illustrates this distinction.
In this case, SEBI observed that the UPSI concerning the impending open offer originated from the Burman Group, the acquirer, and not from Religare Enterprises Limited (“REL”).
The noticee, who was the Executive Chairperson and key managerial personnel of REL, was alleged to have received UPSI relating to the proposed open offer from the acquirer and subsequently traded in the securities of REL.
SEBI did not consider the noticee to be a connected person in relation to the relevant UPSI merely by virtue of her position in REL, since the information originated outside the listed entity whose securities were traded.
However, the noticee was held to be an insider under the second limb of Regulation 2(1)(g), on the basis of possession of UPSI.
The noticee’s position in REL was therefore not, by itself, sufficient to establish her status as a connected person in relation to the particular UPSI.
This finding did not end the enquiry. Even where the connected-person limb is not established, SEBI may independently examine whether the person actually possessed or had access to UPSI under the second limb of Regulation 2(1)(g).
This distinction becomes particularly relevant in takeovers, mergers and open offers, where UPSI may originate outside the listed entity.
Why does this distinction matters?
The difference between both the limbs is not merely semantic. Connected-person status rests on the qualifying association contemplated by Regulation 2(1)(d), whereas the second limb rests on possession of or access to UPSI.
The distinction also has an important evidentiary consequence under Regulation 4(2) of SEBI PIT. In the case of a connected person, the onus of establishing that the person was not in possession of UPSI lies on that connected person. In other cases, the onus of establishing possession lies on SEBI.
Therefore, the classification of a person as an insider due to being a connected person or an insider due to possession or access to UPSI determines not only the basis of liability but also how the burden of proving possession of UPSI operates.
Conclusion
A person may neither be a connected person nor a designated person and may still be held to be an insider if possession of or access to UPSI is established.
This is particularly relevant in acquisitions, mergers and open offers, where UPSI may originate from a person other than the listed entity.
For a person proceeded against under the second limb of Regulation 2(1)(g), the central question is whether possession of or access to the specific UPSI can be established on the available evidence.
[1] SEBI- Final order in the matter of Religare Enterprises Limited (WTM/KV/IVD-1/ID16/32405/2026-27) dated 13 May 2026
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Author: Ms. Radhika Varade [Deputy Manager (R&D Department)]
