Prohibition of Market Abuse in Securities Markets

The International Financial Services Centres Authority (“Authority”), on 25th August 2026, notified the IFSCA (Prohibition of Market Abuse in Securities Markets) Regulations, 2026 (Regulations), published in the Gazette of India on 1st September 2026 and effective from the date of such publication. The Regulations lay down a dedicated, IFSC-specific framework prohibiting market abuse in the securities market, with the objective of protecting the interests of investors. Key features of the Regulations include:

• Comprehensive Definitions Covering Insiders, Fraud and Market Abuse
• Restrictions on Communication and Trading by Insiders
• Disclosure Obligations for Designated Persons
• Wide-Ranging Prohibition of Manipulative, Fraudulent and Unfair Trade Practices
• Institutional Mechanism for Prevention of Market Abuse
• Enforcement, Sanctions and Power to Relax Strict Enforcement
• Disapplication of SEBI Regulations in the IFSC, with Savings

Comprehensive Definitions Covering Insiders, Fraud and Market Abuse

The Regulations define “connected person” as a person who, in the six months prior to the concerned act, was associated with an entity directly or indirectly, including through frequent communication with its officers, a contractual, fiduciary or employment relationship, or a position that allows or is reasonably expected to allow access to material non-public information (MNPI), also termed “unpublished price sensitive information”. An “insider” is any connected person, or any person in possession of, or having access to, MNPI. MNPI is defined to ordinarily include information relating to financial results, dividends, changes in capital structure, mergers and acquisitions, changes in key managerial personnel, rating changes, fundraising proposals, fraud or default, insolvency proceedings, forensic audits, regulatory or judicial action, material litigation, and grant, withdrawal or suspension of key licences, among others.

“Fraud” is defined broadly to include knowing misrepresentation, active concealment, reckless representations, false statements without reasonable grounds, and deceptive behaviour depriving a person of informed consent, while expressly excluding general good-faith comments on government economic policy, the economic situation of a country, or trends in the securities markets. “Market abuse” is defined as unlawful behaviour in the securities market, including but not limited to insider trading and manipulative, fraudulent and unfair trade practices. The Regulations also introduce the concept of a “mule account”, that is, a trading, demat or linked bank account held in one person’s name but effectively controlled by another, and define “designated person” as the controlling shareholders and directors of a listed entity, and such other persons as the listed entity may categorise as such.

Restrictions on Communication and Trading by Insiders

No insider may communicate, provide or allow access to MNPI relating to an entity or its listed (or proposed to be listed) securities to any person, except in furtherance of legitimate purposes, performance of duties or discharge of legal obligations. “Legitimate purposes” includes sharing MNPI in the ordinary course of business with partners, lenders, customers, lead managers, legal advisors, auditors, insolvency professionals and other advisors, provided the sharing is not undertaken to evade the Regulations. Correspondingly, no person may procure MNPI from an insider except for such legitimate purposes, and a person who receives MNPI for a legitimate purpose is themselves treated as an “insider” for the purposes of the Regulations.

No insider may trade, or cause another person to trade, in listed or proposed-to-be-listed securities while in possession of MNPI, and any such trade is presumed to have been executed on the basis of that information. This presumption may be rebutted by demonstrating that the trade falls within a defined set of circumstances, including:

• an off-market inter-se transfer between insiders in possession of the same MNPI, where both parties made a conscious and informed decision;
• a block deal executed through a recognised stock exchange between similarly informed insiders;
• a transaction carried out bona fide pursuant to a statutory or regulatory obligation, or the exercise of stock options priced in advance;
• in the case of non-individual insiders, appropriate information barriers separating those holding MNPI from those taking the trading decision; or
• trades executed under an irrevocable trading plan disclosed to the recognised stock exchange(s) at least 120 days in advance.

Every listed entity must have a policy on disclosures by designated persons. Each designated person must disclose to the listed entity, within two trading days of the transaction, the specified securities (equity instruments, debt securities and other derivative instruments) acquired or disposed of by them or their immediate relatives, where the aggregate value in any calendar quarter exceeds USD 25,000 or such other threshold as the Authority may specify. The listed entity must, in turn, notify the recognised stock exchange(s) and host the disclosure on its website within two working days of receiving it.

Wide-Ranging Prohibition of Manipulative, Fraudulent and Unfair Trade Practices

No person may, directly or indirectly, deal in securities in a fraudulent manner, use any manipulative or deceptive device in relation to listed or proposed-to-be-listed securities, or engage in any act, practice or course of business that operates as a fraud or deceit in connection with dealing in or issuing such securities. Building on this, the Regulations set out an illustrative (non-exhaustive) list of dealings that are deemed manipulative, fraudulent or unfair, including:

• creating a false or misleading appearance of trading, or dealing in securities not intended to effect a transfer of beneficial ownership but only to inflate, depress or cause fluctuations in price;
• inducing subscription to an issue through advance payments to secure fraudulent minimum subscription, or inducing dealing to artificially move prices;
• manipulating the price, or the reference or benchmark price, of securities, including through circular transactions, wash trades, or repeated order placement and cancellation without intent to execute;
• knowingly publishing untrue financial results, financial statements or information on mergers, acquisitions or regulatory approvals;
• dealing in stolen, counterfeit or fraudulently issued securities (subject to a holder-in-due-course/bona fide prior trade exception);
• disseminating information, advice or rumours known to be false or misleading and designed to influence investors;
• placing an order while in possession of non-public information regarding a substantial impending transaction in the same, underlying or derivative securities;
• mis-selling of securities or related services, including false or misleading statements, concealment of material facts or risk, and failure to assess suitability;
• diversion, misutilisation or siphoning of an entity’s assets or earnings, or manipulation of its books of account, that manipulates the price of its securities; and
• illegal mobilisation of funds through an unauthorised collective investment scheme.

An explanation to this provision clarifies that the list is not exhaustive. Any act or omission falling within the general prohibition is covered even if not expressly listed, or even if the listed clause names only a specific category of person.

Institutional Mechanism for Prevention of Market Abuse

Every listed entity must put in place an adequate and effective system of internal controls and a code of conduct to ensure compliance with the Regulations and prevent market abuse. At a minimum, internal controls must provide for identification and confidentiality of MNPI, restrictions on its procurement and communication, identification of employees with access to such information, and periodic review of the effectiveness of these controls. The Authority retains the power to specify additional standards for internal controls and codes of conduct as it deems fit.

Enforcement, Sanctions and Power to Relax Strict Enforcement

Contraventions of the Regulations are dealt with by the Authority in accordance with the corresponding provisions of the IFSCA Act, 2019. Without prejudice to such action, the Authority may, by a reasoned written order and in the interests of investors and the securities market, issue a warning or censure, or suspend or cancel the registration of a person regulated by it, for contravention of the Regulations. The Authority also retains the power to remove difficulties in interpretation, to specify norms, procedures and clarifications by subsidiary instructions, and, for reasons recorded in writing, in the interest of development of the financial services market in the IFSC, to relax strict enforcement of any requirement of the Regulations upon a written application accompanied by a non-refundable fee, to be processed within sixty days.

Disapplication of SEBI Regulations in the IFSC, with Savings

With effect from the commencement of these Regulations, the SEBI (Prohibition of Insider Trading) Regulations, 2015 and the SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 2003 shall cease to apply within the IFSC. Actions taken under those regulations prior to commencement are, however, deemed to have been taken under the corresponding provisions of these Regulations, ensuring continuity for ongoing matters.

Overall, the Regulations replace reliance on the SEBI insider trading and fraudulent trade practice regime with a dedicated, consolidated market abuse framework tailored to the IFSC. By clearly defining insider conduct, codifying an illustrative list of prohibited manipulative and fraudulent practices, and mandating robust institutional controls at the entity level, the Regulations strengthen market integrity and investor protection, reinforcing the IFSC’s positioning as a credible, well-regulated international financial centre.