In a bid to reinforce the integrity of the Indian securities market, the Securities and Exchange Board of India (SEBI) has released a significant circular on April 21, 2025. This circular introduces a critical amendment to the SEBI (Prohibition of Insider Trading) Regulations, 2015 (PIT Regulations), mandating that the automated implementation of the trading window closure period be extended to immediate relatives of Designated Persons (DPs).
What Is the Trading Window Closure?
Under Clause 4 of Schedule B and Regulation 9 of the PIT Regulations, trading by DPs is monitored using a concept called a “notional trading window.” This window must be closed whenever the Compliance Officer determines that DPs or a class of such persons may have access to Unpublished Price Sensitive Information (UPSI). One of the common instances of trading window closure is around the announcement of financial results — from the end of a financial quarter until 48 hours after the disclosure of results.
The New Requirement: What’s Changing?
Until now, the focus of automated restrictions — including PAN-level trading freezes — was primarily on DPs themselves. However, SEBI’s new circular mandates extending this automation to their immediate relatives as well. This is a significant move, considering that trading via family members was a known gray area in insider trading enforcement.
This updated framework will now automatically restrict the trading capabilities of not just the DPs but also their immediate family members during specified blackout periods. It will be done by freezing their PANs at the security level — covering both on-market and off-market transactions, as well as pledge creation.
How Will It Be Implemented?
The process will be rolled out in two phases:
Phase 1 (Effective July 1, 2025): Applies to the top 500 listed companies by market capitalization as on March 31, 2025.
Phase 2 (Effective October 1, 2025): Will cover all remaining listed companies, including those that list after this circular.
The Designated Depository (DD), either NSDL or CDSL as appointed by the listed company, will coordinate the PAN freezes based on company-provided data. Companies must provide PAN and demat details of DPs and their immediate relatives in advance. These details will be used to block any trades during the closure period.
Key Compliance Measures
Companies must confirm and upload data at least two trading days before the window closure.
The DD will inform Stock Exchanges and other depositories at least one trading day before the blackout.
The PAN-level freeze will include all equity and derivative trades and apply to all identified demat accounts.
Any updates to DP or family member information must be processed within two trading days.
Companies may also request exemptions under specific provisions of the PIT Regulations, which must be processed within defined timelines.
Conclusion: A Stronger Shield for Market Integrity
SEBI’s directive reflects its proactive stance in plugging potential loopholes in the PIT Regulations. By bringing immediate relatives under the purview of automated trading window restrictions, SEBI is aiming to eliminate indirect insider trading activities. While this increases compliance obligations for listed companies, it significantly boosts the transparency and fairness of India’s capital markets — a move welcomed by regulators, investors, and governance advocates alike.
