For a listed company, insider-trading compliance is not just a rule that says “do not trade on unpublished price sensitive information”. A workable system has several layers: identify the people whose roles give them access to UPSI, control trading during sensitive periods, apply pre-clearance where the company’s code requires it, monitor contra trades, and preserve a reliable trail of who shared UPSI with whom. The starting legal source is SEBI’s consolidated Prohibition of Insider Trading Regulations, 2015.
1. Start with the core prohibition, not the trading window
Regulation 4(1) is the foundation: an insider must not trade in securities that are listed or proposed to be listed while in possession of UPSI, subject to the specific defenses and exceptions contained in the Regulations. This matters because a trading-window or pre-clearance process is a compliance control; it does not replace the underlying prohibition.
A person can also be an insider even if the company has not labelled that person a “designated person”. Access to or possession of UPSI can itself bring a person within the insider framework. Compliance teams should therefore avoid treating the designated-person list as the complete universe of insider-trading risk.
2. Who should be treated as a designated person?
Under Regulation 9, the board and compliance officer identify designated persons for the code of conduct based on role, function and the access that the role can provide to UPSI, in addition to seniority and professional designation. In practice, the exercise should be access-led rather than title-led.
- Map functions that routinely receive draft financial results, capital-raising information, M&A material, major contracts, litigation or other potential UPSI.
- Include employees and other persons required by the Regulations and the company’s approved code, rather than limiting the list to senior management.
- Maintain current details for immediate relatives wherever the trading-control framework requires them.
- Review the list when roles change, reporting lines move or new sensitive projects begin.
3. Trading window: what closure actually does
Schedule B uses a notional trading window as a monitoring tool. The window is closed when a designated person or class of designated persons can reasonably be expected to possess UPSI relating to the relevant securities. Designated persons and their immediate relatives must not trade while that window is closed.
The compliance officer determines reopening after considering when the UPSI has become generally available and can be assimilated by the market. The minimum standard provides that reopening cannot be earlier than 48 hours after the information becomes generally available.
For financial-result periods, SEBI has also moved beyond a purely manual control. Its July 2023 circular extended the PAN-at-security-level freezing framework for designated persons to all listed companies through a phased rollout. SEBI’s April 2025 circular then extended automated trading-window closure to immediate relatives of designated persons for declaration of financial results. A listed company should therefore reconcile its internal designated-person and immediate-relative records with the data used for the depository-based restriction process.
4. Pre-clearance is a threshold control, not permission to trade on UPSI
When the trading window is open, Schedule B requires pre-clearance by the compliance officer where the value of a proposed trade exceeds the threshold stipulated by the board. The threshold is therefore an internal code parameter; teams should not invent a universal rupee limit for pre-clearance.
Before approving a trade, the compliance officer may seek a declaration that the applicant is not in possession of UPSI and must consider whether that declaration is reasonably capable of being inaccurate. Most importantly, pre-clearance is not a defense to trading while in possession of UPSI. If Regulation 4(1) prohibits the trade, an approval workflow cannot cure that problem.
Worked example
Assume a finance manager is a designated person and receives the substantially final quarterly results before public disclosure. The company’s trading window is closed. The manager cannot trade, and the same closure applies to the manager’s immediate relatives within the code framework. Even if the manager’s proposed trade would normally qualify for pre-clearance, pre-clearance does not override the possession-of-UPSI prohibition. After the results become generally available, the company should reopen the window only in accordance with Schedule B, including the minimum 48-hour requirement.
5. Contra trade: watch the direction and the six-month clock
Schedule B requires the code of conduct to prescribe a period of not less than six months during which a designated person who has been permitted to trade must not execute a contra trade. In simple terms, an opposite open-market trade within the restricted period can trigger the rule. SEBI’s FAQs also make clear that the analysis can differ for ESOP exercises and specified corporate-action transactions, so the compliance team should not apply a crude “every opposite transaction equals a breach” rule without checking the Regulations and current guidance.
The compliance officer may be empowered to relax the contra-trade restriction for reasons recorded in writing, provided the relaxation does not violate the PIT Regulations. Where a prohibited contra trade is nevertheless executed, the code provides for disgorgement of profits for remittance to SEBI’s Investor Protection and Education Fund. A practical register should therefore track trade date, direction, security, immediate-relative trades, exemption basis and the end of the applicable contra-trade period.
6. Structured Digital Database: the information-governance layer
Regulation 3(5) requires every person required to handle UPSI to maintain a structured digital database containing the nature of UPSI, the names of persons who shared it, the names of persons with whom it was shared and their PAN or another lawful identifier where PAN is unavailable. The database must be maintained internally, must not be outsourced, and must have controls such as time-stamping and audit trails designed to prevent tampering.
Regulation 3(6) requires SDD information to be preserved for at least eight years after completion of the relevant transactions. If SEBI communicates that an investigation or enforcement proceeding is underway, relevant SDD information must be preserved until that proceeding is completed. This means the SDD should be treated as an evidentiary record, not as a spreadsheet completed retrospectively after a compliance review.
7. A practical monthly compliance checklist
- Review the designated-person universe. Check role changes, new projects, finance access, board-support functions and other employees who now receive UPSI.
- Reconcile immediate-relative information. Ensure records used for trading-window controls and automated freezes are current.
- Test UPSI identification and escalation. Sensitive information should be identified early enough for window closure and need-to-know controls to work.
- Check SDD entries. Verify that the nature of UPSI, sharer, recipient, identifier, time stamp and audit trail are captured contemporaneously.
- Review pre-clearance requests. Confirm the board-approved threshold was applied and that the applicant’s UPSI status was considered.
- Run a contra-trade check. Compare purchases and sales by designated persons and relevant immediate relatives across the six-month restricted period, while separately evaluating recognised exceptions.
- Preserve the evidence. Keep approvals, declarations, exemption reasons, trade data, closure notices and SDD records in a form that can be reconstructed during audit or regulatory review.
Common mistakes to avoid
- Assuming only senior executives can be designated persons.
- Treating an open trading window as proof that a person is free to trade despite possessing UPSI.
- Using pre-clearance as a substitute for checking UPSI possession.
- Ignoring immediate-relative trades when reviewing window or contra-trade controls.
- Maintaining the SDD after the event rather than as a contemporaneous, non-tamperable record.
- Applying the six-month contra-trade rule mechanically without checking the treatment of ESOPs, corporate actions and permitted relaxations.
Practical takeaway
A defensible PIT compliance system separates three questions: may this person trade under the substantive UPSI prohibition, is the trade allowed under the company’s trading controls, and can the organisation prove how the UPSI was handled? Designated-person mapping, trading-window controls, pre-clearance, contra-trade monitoring and the SDD should operate as one connected process. Because SEBI’s framework can be amended, compliance teams should validate their code and operating procedures against the current PIT Regulations and the applicable SEBI circulars before acting.
