SEBI Proposes Expanding Insider Trading Rules to Include More Relatives of Connected Persons

Mumbai: The Securities and Exchange Board of India (SEBI) plans to broaden the definition of relatives in insider trading regulations. SEBI suggests replacing “immediate relative” with “relative” to include more family members. Under the new proposal, relatives of a connected person would include spouses, siblings, siblings of spouses, siblings of parents, any lineal ascendant or descendant, and their spouses.

SEBI noted that some people, who are not currently considered “connected persons” under the existing rules, might still have access to unpublished price-sensitive information (UPSI) due to their close relationships with connected persons.

These individuals, because of their close ties with connected persons, might be in a position to engage in insider trading, SEBI stated in a discussion paper released on Monday.

A “connected person” is someone with a connection to the company that gives them access to UPSI.

SEBI also proposed including more categories of connected persons. This would cover a firm, its partner or employee, if they are connected to a connected person, and anyone whose advice a connected person follows. Additionally, a company whose board of directors or managing director acts on the directions of a connected person would be included. SEBI also proposed covering people who share a residence and have a financial relationship with a connected person.

The aim is for relatives of a connected person to also be considered connected persons under these regulations. It is presumed that a connected person has access to UPSI, but this can be challenged, SEBI said.