The Securities and Exchange Board of India (“SEBI”) issued a circular SEBI/HO/ISD/ISD-PoD-2/P/CIR/2025/55 dated 21.04.2025 (“Circular”) to all recognized stock exchanges, depositories, and listed companies to announce the extension of the automated trading window closure mechanism. This extension applies to the immediate relatives of Designated Persons (“DPs”) during the announcement of financial results. This enhancement to compliance mechanisms under the SEBI (Prohibition of Insider Trading) Regulations, 2015 (“PIT Regulations”), is intended to strengthen surveillance and prevent insider trading. The Circular is issued in exercise of the powers conferred under Section 11(1) of the SEBI Act, 1992, read with Regulations 4(3) and 11 of the PIT Regulations.
Clause 4(1) of Schedule B, read with Regulation 9 of the PIT Regulations, mandates that designated persons and their immediate relatives must refrain from trading during the trading window closure period, which is used to prevent misuse of unpublished price sensitive information (“UPSI”). Clause 4(2) further specifies that the trading restriction should begin at the end of each quarter and last until 48 hours after the financial results are disclosed.
Previously, SEBI had mandated the use of PAN-level restrictions to freeze trading by DPs during the trading window closure period. However, inadvertent non-compliances continued to occur. To address this, a framework was established via a clause 3.4.2 of the Master Circular dated 23.09.2024, requiring exchanges and depositories to develop systems for freezing PANs of DPs at security level during such periods. Now, this framework has been extended to immediate relatives of DPs, based on successful implementation and consultations with stakeholders.
To ensure a smooth rollout, SEBI prescribes a two-phase implementation:
🔸 Phase 1 (effective from July 1, 2025): Applies to the top 500 listed companies based on BSE market capitalization as of March 31, 2025.
🔸 Phase 2 (effective from October 1, 2025): Applies to all other companies listed on BSE, NSE, and MSEI, including any that get listed after this Circular.
Process for Implementation
- The Designated Depository (“DD”) grants listed companies access to a portal to manage trading window closures.
- DD auto-fills PAN, names, and demat account details of DPs using existing disclosures. Listed companies must add immediate relatives’ details.
- Companies confirm details such as ISIN, PAN, and demat info for DPs and relatives. In case of any update to the details, the listed companies must take necessary steps in accordance with the SEBI Circular No. SEBI/HO/ISD/ISD/CIR/P/2020/1683 dated 09.09.2020.
- Companies must specify the trading window start (T-day) and end dates on the portal immediately after the end of every quarter. For financial results, the window begins the day after the quarter ends and closes 48 hours post-results.
- Details must be submitted at least two trading days before window closure (T-2).
- DD must share the details received from the listed company with Stock Exchanges and other Depositories at least one trading day before the window closes (T-1) and updates daily during the period.
- Depositories must identify demat accounts of immediate relatives of DPs based on PAN, as sole or joint holders.
- Depositories must restrict off-market and pledge transactions during the window using a specific reason code.
- Based on the data received from the Depositories, the Stock Exchanges must restrict on-market trades of immediate relatives during the window starting T-day.
- Any additions or changes to DPs or their relatives must be processed within two trading days of notification. Example: An update on July 8 must be reflected by July 10.
- Companies may request exemptions for specific persons, which must be processed within two trading days.
- The freezing/de-freezing of PAN at the security level due to addition/deletion of information will be effective post market hours.
- Pay-in and pay-out obligations, if any, executed before freezing the PAN of immediate relatives of DP can be settled or closed out.
- Data formats and timelines will be standardized by Depositories and Stock Exchanges, with operational guidelines issued for listed companies by the Depositories
- Any discrepancies are to be resolved collaboratively between Depositories, Stock Exchanges, and the listed company.
This Circular reinforces SEBI’s commitment to strengthening insider trading controls by enhancing surveillance mechanisms. By including immediate relatives in the automated trading restriction framework, the compliance burden on listed entities is reduced, and market integrity is improved.
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