SEBI Plans To Widen Ambit To Tackle Insider Trading

On Monday, the Securities and Exchange Board of India proposed new measures to widen the scope of regulations governing insider trading. The revised rules aim to cover a broader range of individuals and entities linked to those with access to sensitive financial information.

Under the new proposal, the definition of “connected person” will be updated. Specifically, the term “immediate relative” will be replaced with "relative", aligning with the definition used in the Income Tax Act of 1961. This change is intended to simplify and clarify who falls under insider trading regulations.

Additionally, the market regulator is introducing several new categories of connected persons. The proposed regulations will now include firms and their partners or employees, if a connected person is involved with them. It will also cover individuals who routinely advise or direct a connected person, as well as corporate bodies whose leaders act according to the guidance of a connected person.

The revised rules will also address individuals sharing a household or having significant financial relationships with a connected person. This includes cases of financial dependency or frequent transactions. Moreover, in Hindu undivided families, where a "Karta", or member, is a connected person or their relative, this will also fall under the expanded definition.