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Difference between Insiders, Designated Person and Connected Person as per SEBI (Prohibition of Insider Trading) Regulations, 2015

SEBI, through its SEBI (Prohibition of Insider Trading) (Third Amendment) Regulations, 2024 dated December 4, 2024, has made minor changes to the definitions of ‘connected person,’ ‘immediate relative,’ and ‘insider.’ Additionally, the term ‘immediate relative’ in the definition of ‘deemed connected person’ has been replaced with ‘relative,’ and a specific definition of ‘relative’ has been added. This change broadens the definition of “deemed connected persons” to include a wider range of individuals and entities likely to have access to unpublished price-sensitive information (UPSI).

To better understand the impact of these amendments, I have prepared an analysis distinguishing the roles of an Insider, Designated Person, and Connected Person.

Aspect Insider Designated Persons (DPs)        Connected Persons (CPs)
Definition Any person who is in possession of or has access to unpublished price-sensitive information (UPSI). This includes both DPs and CPs, as well as any other individual who has access to UPSI.

(For the precise legal definition refer Reg. 2(1)(g) of PIT Regulations)

On the basis of role and function in the organisation certain individuals are designated by the Company as to have access to UPSI. These DPs are generally Promoters, CEO, employees upto two levels below CEO, any support staff of listed company, intermediary or fiduciary such as IT staff or secretarial staff who have access to UPSI and such other persons as defined by the company’s internal policy.

(For the precise legal definition refer Reg. 9(4) of PIT Regulations)

Any person who is or has been associated with the company directly or indirectly, in any capacity, during the six months prior to the act of insider trading. This includes relatives, professional or business associates, etc.

(𝘍𝘰𝘳 𝘵𝘩𝘦 𝘱𝘳𝘦𝘤𝘪𝘴𝘦 𝘭𝘦𝘨𝘢𝘭 𝘥𝘦𝘧𝘪𝘯𝘪𝘵𝘪𝘰𝘯, refer Reg. 2(1)(d) of PIT Regulations)

Obligations
  • Maintain confidentiality of UPSI.
  • Abide by the general prohibition on insider trading.
  • Disclose holdings and trading in securities. Initial, annual, continual (trades) disclosures including off-market trades.
  •  Maintain confidentiality of UPSI.
  • Abide by the company’s code of conduct for prevention of insider trading.
  • Enter the details of persons with whom UPSI is shared in SDD.
  • A DP is accountable for the trades executed by self, spouse, immediate relative, Portfolio manager, brokers and his/her CP.
  • Maintain confidentiality of UPSI.
  • Abide by the general prohibition on insider trading.
Onus The onus is on the person levelling the charge to demonstrate that the individual possessed UPSI while executing the trade. Onus is on DP to prove that trade was not motivated on account of UPSI. The onus is on the CP to prove that they are not connected if accused of insider trading.
Company Obligations
  • Implement policies to prevent insider trading.
  • Ensure compliance with SEBI regulations.
  • Monitor trading activities and handle disclosures related to insiders.
  • Identify and designate DPs
  • Ensure DPs adhere to the code of conduct.
  • Review and approve Trading Plans
  • Review and approve pre-clearance of trades
  • Implement internal controls to monitor DPs’ trading activities.
  • Obtain initial, annual and continual disclosures from DP
  • Define and communicate Trading window closure period
  • Maintain records of disclosures, approvals, trading plans, and any other relevant documents to demonstrate compliance with SEBI regulations.
  • Implement and enforce penalties for violations as per the company’s policy.
  • Ensure DPs are aware of the requirement to record and update information in the SDD.
  • While not explicitly mandated, the identification of CP is implicitly necessary to ensure compliance with the insider trading regulations.
  • Monitor trading activities of connected persons to the extent possible.
Restrictions General prohibition on trading while in possession of UPSI.
  • No Designated Persons including their immediate relative should trade in the Company’s shares during the period when the trading window is closed.
  • Pre-clearance required for trading by Designated Persons or their immediate relative who intend to deal in the securities of the company in excess of Rs. Ten Lakh whether in one or a series of transactions over any calendar quarter.
  • All Designated Persons and their immediate relatives shall not enter into Contra trade for six months following the prior transaction. Even Intra day trade falls under the ambit of Contra Trading.
General prohibition on trading while in possession of UPSI.
Disclosures No specific mandatory disclosures unless defined as a DP or CP.

 

  • Initial disclosure of holdings upon becoming a DP.
  • Continual disclosures for trades executed by immediate relative of DP exceeding Rs. Ten Lakh whether in one or a series of transactions over any calendar quarter.
  • Annual disclosures as per company policy containing name & PAN of immediate relatives and persons with whom the DP shares material financial relationship.
No mandatory initial or continual disclosures. However, the PIT Regulations provides companies with the discretion to mandate disclosures from CP or a class of CP who are not otherwise covered by the mandatory initial and continual disclosure requirements under regulations 7(1) and 7(2).

*****

Prepared by: CS Ruchi Bohra | Deputy Manager | Century Plyboards (India) Limited

Should you have any inquiries or suggestions, please do not hesitate to reach out to me at: Email: [email protected]

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Author Bio

I am a qualified Company Secretary (Rank holder) and a law graduate. My in depth study of law and its interpretation differs me from others. I am a Corporate Law savant, having hands on experience in dealing with matters relating to Company Law, SEBI (LODR) Regulations, DPE, POSHA, RTI, etc. I View Full Profile

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