Mumbai: The Securities and Exchange Board of India (Sebi) has proposed to expand the definition of relatives under insider trading rules. The regulator has proposed to substitute immediate relative with relative to cover a wider group of family members. It said relatives of a connected person would mean spouse, siblings, siblings of spouse, siblings of parents, any lineal ascendant or descendant and all their spouses.
“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of the definition of ‘connected persons’ as per existing regulations, may also be in a position to have access to UPSI (unpublished price sensitive information) from ‘connected persons’ to a company, by virtue of their close relationship with such ‘connected persons’,” Sebi said in a discussion paper on Monday.
Such deemed connected persons, owing to their proximity and close relationship with the connected persons, are considered to be in such a position where they can potentially indulge in insider trading, the regulator said.
A connected person means a person who has a connection with the company that is expected to put him in possession of UPSI.
The regulator has also proposed to include more categories of connected persons.
It said, a firm, its partner or its employee in which a connected person is also a partner. Any person on whose advice a connected person would act.
Also, the proposed rules would cover a corporate body whose board of directors and managing director could act based on the directions of a connected person.
Besides, a person sharing residence and having financial relationship with a connected person, Sebi said.
“It is intended that the relatives of a connected person too become connected persons for the purpose of these regulations. It is a rebuttable presumption that a connected person had UPSI,” Sebi said.
