SEBI’s Latest Amendment to Insider Trading Regulations: Fostering Transparency by Expanding the Scope

On December 4, 2024, the Securities and Exchange Board of India (SEBI) issued the Securities and Exchange Board of India (Prohibition of Insider Trading) (Third Amendment) Regulations, 2024. These amendments took effect from December 4, 2024. Earlier, on July 29, 2024, SEBI had released a consultation paper proposing amendments to the SEBI (Prohibition of Insider Trading) Regulations, 2015.

• Inclusion of firms, partners and household members: Firms or its partners or its employees where a connected person is a partner are now deemed connected persons. Similarly, individuals sharing a household or residence with a connected person will also be classified as connected persons.
• Revised Definition of “Relative”: The term immediate relatives has been replaced with “relative” this has been expanded to include not just immediate family members but also spouses, parents, siblings, and children of a connected person. This is in line with the definition of relative under Income Tax Act, 1961.
• Burden of Proof: The regulations also consider the relatives of a connected person as connected persons. Further, it is a rebuttable presumption that a connected person had UPSI.

SEBI’s recent amendments to the Prohibition of Insider Trading (PIT) Regulations, 2024, reflect its proactive approach to addressing emerging trends in insider trading. By broadening the definition of ‘connected persons’ the regulator is shifting the burden of proof onto the accused, effectively requiring them to disprove their connection rather than the regulator proving it. This shift not only heightens the risk of unjust accusations but also allows individuals to be unfairly branded as ‘connected persons’ without cogent evidence, while facing the serious charge of insider trading. Overall, while the amendments enhance regulatory oversight, they also necessitate careful consideration to strike a balance between enforcement and fairness.

The Securities and Exchange Board of India (Prohibition of Insider Trading) (Third Amendment) Regulations, 2024 can be found here.

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KC Jacob, Counsel, Email – kcjacob@elp-in.com

Shourya Tanay, Senior Associate – Email – shouryatanay@elp-in.com