SEBI Expands Framework for Trading Window Closure to Immediate Relatives of Designated Persons

The Securities and Exchange Board of India (“SEBI”) has issued a circular bearing number SEBI/HO/ISD/ISD-PoD-2/P/CIR/2025/55 dated April 21, 2025, extending the automated trading window closure mechanism to immediate relatives of Designated Persons (DPs) under the SEBI (Prohibition of Insider Trading) Regulations, 2015 (“PIT Regulations”).

Key Updates:

Applicability to Immediate Relatives of Designated Persons:

SEBI has mandated that the automated freeze of trading during trading window closure, earlier applicable only to DPs, will now also apply to their immediate relatives. This move strengthens the enforcement of insider trading controls.

System-Based Restriction of Trading Activities:

Under the framework, PAN-based restrictions at the ISIN level will be automatically enforced during trading window closure. This includes freezing of demat accounts for both off-market and on-market transactions in securities of the listed company.

Phase-Wise Implementation Timelines:

The implementation of this extension will be carried out in two phases. Phase 1 will commence on July 1, 2025, and will apply to the top 500 listed companies based on BSE market capitalization as on March 31, 2025. Phase 2 will begin from October 1, 2025, and will cover all other listed companies, including those that get listed on stock exchanges after the issuance of this circular.

Role of Listed Companies and Depositories:

Listed companies must update Designated Depositories (DDs) with PAN and demat account details of DPs and their immediate relatives.

The DD will coordinate with stock exchanges and other depositories to implement and lift restrictions.

Any changes in DPs or their relatives during the window must be updated and restrictions effected within 2 trading days.

Exemption Provision:

Listed companies may request exemptions for certain individuals under Clause 4(3) of Schedule B of the PIT Regulations. These must be processed within 2 trading days and restrictions will reapply automatically post exemption expiry.

Reporting Requirements:

Depositories must submit quarterly reports to SEBI, covering number of companies involved, PANs restricted, demat accounts affected, and exemptions granted.

SEBI’s extension of the automated trading window closure to immediate relatives of Designated Persons is a significant step towards tightening insider trading controls. By leveraging system-driven processes and standardized reporting, SEBI aims to ensure strict compliance with PIT Regulations and reduce the risk of inadvertent violations. Listed companies and intermediaries are expected to swiftly align with this framework to uphold market integrity and investor confidence.