Sebi proposes expanding list of 'connected persons' for insider-trading regulations

The regulator has also suggested including six other categories of connected persons.

The market regulator has proposed expanding the definition of connected persons under Sebi (Prohibition of Insider Trading) Regulations or (PIT) Regulations to include more relatives.

Connected persons are those who are likely to have access, directly or indirectly, to unpublished price-sensitive information (UPSI) because of the nature of their employment or their profession, and those associated with them including their immediate relatives such as parents, siblings and child. The regulator has suggested including new categories of relatives to this list of connected persons.

In a consultation paper dated July 29, the Securities and Exchange Board of India (Sebi) has proposed an amendment replacing "immediate relative" with "relative" under regulation 2(1)(d), which is the section that defines connected persons.

The new category of "relative" of connected persons--who will also be considered connected persons--suggested include siblings of spouse, siblings of parents, any lineal ascendant or descendant and their all of their spouses.

The definition of "immediate relative" under 2(1) (f) would be retained and be limited to disclosures and code of conduct under PIT Regulations.

The regulator has also suggested including six other categories of connected persons.

1. a firm, its partner or its employee in which a connected person specified in clause (i) is also a partner;

Clause (i) broadly includes people who are employed with the company or have a contractual or fiduciary relationship with the company in the previous six months.

2. any person on whose advice, directions or instructions, a connected person specified in clause (i) is accustomed to act.

3. a body corporate whose board of directors, managing director or manager is accustomed to act in accordance with the advice, directions or instructions of a connected person specified in clause (i).
4. persons sharing household or residence with a connected person specified in clause (i);

5. persons having material financial relationship with a connected person specified in clause (i) including for reasons of employment or financial dependency or frequent financial transactions;

6. a Hindu Undivided Family (HUF) where Karta or any of the member/coparcener is a connected person specified in clause (i) or a relative of connected persons specified in clause (i)