In a move aimed at enhancing market integrity, the Securities and Exchange Board of India (SEBI) has proposed a new regulation that could impact the trading activities of immediate relatives of designated persons (DPs) in listed companies. This proposal, outlined in a consultation paper released on February 7, 2025, seeks to extend the existing practice of automatic trading window closure to include the immediate family members of DPs when a company declares its financial results.
What Does This Mean for Immediate Relatives?
Currently, DPs—individuals with access to sensitive financial information—are subject to a trading window closure, which restricts their ability to buy or sell shares during key financial periods. SEBI now plans to extend this restriction to their immediate relatives as well, ensuring a wider net of transparency and fairness.
According to SEBI’s proposed framework, “immediate relatives” are defined under the Prevention of Insider Trading (PIT) Regulations as the spouse, parents, siblings, and children of a designated person—or of their spouse—who are either financially dependent on the individual or consult them regarding decisions related to securities trading. This includes family members who may influence trading activities based on shared financial interests.
Aiming for Greater Transparency
This new measure is part of SEBI’s broader efforts to prevent insider trading and increase market transparency. The consultation paper, issued by the market regulator on February 7, highlights how the proposed changes would ensure that family members of DPs, who may be privy to the same sensitive information, are also held accountable.
Seeking Public Feedback
The public has until February 28, 2025, to submit comments and suggestions regarding the proposal. SEBI will review this feedback before implementing the changes.
This proposal follows a similar framework already in place for DPs, which was first introduced in August 2022. The system has been successfully operating by freezing the PAN (Permanent Account Number) during the trading window closure period, preventing unauthorized trading during sensitive financial times.
With this expansion, SEBI aims to create a more comprehensive framework for preventing the misuse of insider information across a wider group of individuals, fostering fairness and transparency in India’s securities market.
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