The Securities and Exchange Board of India (SEBI) on Monday (29 July, 2024) has proposed expanding the definition of “relatives” in insider trading rules.
Instead of just considering immediate family members, the new proposal includes a larger group of relatives. This would now include a connected person’s spouse, siblings, their spouses, in-laws, as well as any direct ancestors or descendants and their spouses.
In a consultation paper, SEBI said, “It has been observed that certain categories of persons who are not covered in the scope of the definition of ‘connected persons’ as per existing regulations, may also be in a position to have access to UPSI from ‘connected persons’ to a company, by virtue of their close relationship with such ‘connected persons’.
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Connected persons are those who, due to their job or profession, are likely to have direct or indirect access to unpublished price-sensitive information (UPSI). This includes their immediate family members like parents, siblings, and children.
SEBI highlighted that some people not currently covered by the rules might still have access to unpublished price-sensitive information (UPSI). This could happen because they are closely connected to company officials or key employees who have access to UPSI.
Additionally, SEBI has also proposed adding six more types of people to the list of “connected persons” and they are as follows:
– A business or its employees where a connected person is also a partner.
– Anyone whose advice or instructions a connected person usually follows.
– A company whose board or manager follows the advice or instructions of a connected person.
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– People who live with a connected person.
– People who have significant financial dealings with a connected person, like through employment or regular transactions.
– A Hindu Undivided Family (HUF) where the head or any member is a connected person or their relative.
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