Trading Window Norms: SEBI Expands Immediate Kin’s Definition For Designated Persons

The Securities and Exchange Board of India has come out with a circular that expands the scope of its automated trading window closure mechanism to include the immediate relatives of designated persons in listed companies.

The move aims to further curb insider trading by preventing those with potential access to unpublished price-sensitive information from trading during specific periods before financial results are announced.

Earlier, the restrictions applied only to the designated persons. However, now the markets regulator has extended the scope to cover their immediate relatives as well, according to its circular.

SEBI's definition of immediate relative includes a spouse, a parent and sibling, or child. It defines children—of the person or the spouse—as those that are financially dependent or consult the person in decisions related to trading in securities.

This move follows a system already in place for designated persons, which uses PAN-based trading freeze.

To ensure a smooth rollout, the implementation will be carried out in two phases. The first phase begins on July 1, 2025, and applies to the top top-500 listed companies based on market capitalisation. The second phase, starting from Oct. 1, 2025, will cover all remaining listed companies.

Explaining the procedure, SEBI said a designated depository will provide portal access to listed companies. These companies are required to upload details such as PAN, names, and demat account numbers of both designated persons and their immediate relatives.

Additionally, they are required to input the start and end dates of the trading window closure.

To maintain timely execution, companies are required to confirm the submitted data at least two trading days before the trading window closure begins. Thereafter, the designated depository will share this information with the stock exchanges and the other depository at least one day prior to the closure period.

Based on this data, the depositories and stock exchanges will implement the trading freeze for designated persons' immediate relatives in their equity and derivative holdings. Any updates or changes are required to be acted upon within two trading days.

Additionally, exemptions, where allowed under SEBI rules, can be granted and will be automatically reversed once the exemption period ends, the notice added.

To ensure consistency, standardised formats and timelines for data submission will be issued by the depositories. Any disputes or discrepancies will be resolved through coordination among the depositories, stock exchanges, and the listed company involved, SEBI said.

For monitoring purposes, depositories are required to submit a quarterly report to SEBI detailing how many companies are covered, the number of immediate relatives affected, PANs frozen, and exemptions granted during the period.

—With PTI inputs