Mapping insider trading laws: A database for SEBI’s Prevention of Insider Trading Regulations

by Natasha Aggarwal.

The Indian legal framework on insider trading is complex and has, over the years, been significantly updated and amended. The insider trading regulations were introduced in 1992 and amended four times between 2002 and 2011. This set of regulations was replaced by the Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 2015 (PIT Regulations), which has been amended 12 times between 2018 and 2024. Many of these amendments aimed to address regulatory gaps, such as those concerning the scope of terms like "connected persons" and "unpublished price sensitive information" (UPSI). However, frequent changes in the PIT Regulations have created challenges in understanding the correct position in law and in analysing past events and developments.

To help solve this problem, we have prepared a relational database by identifying the constituent elements of the violation of "insider trading" in the PIT Regulations. The database does not map changes to the disclosure requirements in the PIT Regulations.

The prohibitions under the PIT Regulations may appear straightforward but are often complex in practice and implementation. For example, understanding insider trading requires understanding (i) what constitutes UPSI, which in turn requires understanding what constitutes generally available information, and (ii) who is an insider, which in turn requires understanding the scope of terms such as "connected person", "deemed to be connected person", and "immediate relative". Moreover, certain regulated entities are required to adopt a code of conduct - a requirement that initially applied only to listed companies but now applies to entities such as mutual funds and intermediaries.

Based on the above, we have identified the following key definitions that require clarity for better compliance with, and understanding of, the PIT Regulations:

• Connected person;
• Deemed to be connected person;
• Insider;
• Immediate relative / relative;
• Trading;
• Unpublished price-sensitive information (UPSI); and
• Generally available information.

We have also identified the following violations of the PIT Regulations:

• Communication of UPSI
• Trading when in possession of UPSI; and
• Failure to implement or comply with the code of conduct.

These issues are referred to as 'Indicators' in our database.

We expect that this will be helpful for researchers and market participants to analyse the evolution of these indicators and the legal framework for insider trading. Our indicators are linked to: (i) related regulatory instruments, such as amendments (along with the date on which the amendment takes effect), SEBI's board meetings, consultation papers, and circulars, and (ii) provisions of the earlier insider trading regulations (i.e., the Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 1992 (1992 Regulations)).

For example, the definition of UPSI is mapped to an amendment in 2018, two consultation papers, two board meetings, and the provision of the 1992 Regulations that defined UPSI. This allows a user to map all documents in which an indicator has been discussed, and then understand and analyse: (i) the current legal position, (ii) the evolution of a definition or a violation, and (iii) the SEBI's reasoning in introducing certain amendments and the impact of specific documents, such as consultation papers, on regulatory provisions.

The database is available here. We encourage you to read the tab titled "Read me" to understand how to navigate this database.

We will update this to reflect any further changes to the PIT Regulations. If you notice any errors or inconsistencies, please reach out to us at info@trustbridge.in, and we will make the necessary corrections.

Natasha is a Senior Research Fellow at TrustBridge.