Reg.1 Short title and commencement

       (1) These regulations may be called the Securities and Exchange Board of India (1[Prohibition of]Insider Trading) Regulations, 1992.
       (2) These regulations shall come into force on the date of the publication in the Official Gazette.
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1. Inserted by the SEBI (Insider Trading) (Amdt.) Regulations, 2002 w.e.f. 20.02.2002

Reg.2 Definitions

       In these regulations, unless the context otherwise requires;-
       (a) "Act" means the Securities and Exchange Board of India, Act 1992 (15 of 1992);
       (b) "body corporate" means a body corporate as defined under section 2 of the Companies Act, 1956 (1 of 1956);
       (c) "connected person" means any person who-
       (i) is a director, as defined in clause (13) of section 2 of the Companies Act, 1956 (1 of 1956) of a company, or is deemed to be a director of that company by virtue of sub-clause (10) of section 307 of that Act
       or
       (ii) occupies the position as an officer or an employee of the company or holds a position involving a professional or business relation

SEBI (Prohibition of Insider Trading) Regulation, 1992 – Reg. 2: Legal Commentary

Introduction

Regulation 2 of the SEBI (Prohibition of Insider Trading) Regulations, 1992 is the introductory definitional provision that sets the stage for the entire regulatory framework by defining key terms and scope. It establishes the foundational vocabulary—such as "insider," "connected person," and "unpublished price-sensitive information"—that the subsequent provisions rely upon to prohibit insider trading and ensure market fairness.

What Does Section Says

Regulation 2 provides the essential definitions for the Act. It identifies who qualifies as an "insider" (typically directors, officers, and those with access to unpublished price-sensitive information), delineates the meaning of "connected persons," and defines what constitutes "unpublished price-sensitive information" (UPSI). It clarifies the ambit of the regulation by specifying the categories of persons who fall within its purview.

Essential Ingredients

The essential elements covered under Regulation 2 include:- Definition of Insider: A person who is a director or officer of a listed company, or who is in possession of, or has access to, UPSI.- Definition of Connected Person: Individuals who have a relationship with the company or its insiders that could potentially give them access to UPSI.- Definition of UPSI: Information relating to the company that is not generally available to the public and which, if published, would be likely to materially affect the price of the company's securities.

Scope of Section

The scope of Regulation 2 is comprehensive, capturing not only insiders of listed companies but also those connected to them. It extends the prohibition to anyone who could access or is in possession of UPSI, thereby creating a broad net to prevent trading based on non-public information. It applies to both direct and indirect trading in securities.

Punishment for Section

While Regulation 2 itself is a definitional provision, violations of the regulations it defines are subject to severe penalties under the SEBI Act, including disgorgement of profits, fines up to ₹25 crores or three times the profit made (whichever is higher), and potential imprisonment.

Legal Comments

• "Insider" - The regulation defines an insider as a director, officer, or any person in possession of or having access to unpublished price-sensitive information, thereby establishing the primary class of regulated persons - [SEBI (Prohibition of Insider Trading) Regulations, 1992, Reg. 2].
• "Connected Person" - The definition extends the regulatory net to individuals connected to insiders or the company, ensuring that those who may indirectly access UPSI are also captured - [SEBI (Prohibition of Insider Trading) Regulations, 1992, Reg. 2].
• "Unpublished Price-Sensitive Information" - It establishes the core concept of UPSI as information that is not generally available and could materially affect security prices, forming the basis for the prohibition - [PIT - Regulation 2].
• "Listed Company Scope" - The regulation primarily applies to insiders of companies listed on stock exchanges, ensuring that the securities market's integrity is protected - [code-conduct-prohibition-insider-trading].
• "Form B Disclosure" - It mandates that insiders, specifically directors and officers of listed companies, must disclose their holdings to the company in Form B, linking the definition to an actionable compliance obligation - [SEBI (Prohibition of Insider Trading) Regulations, 1992, Reg. 2].
• "Framework for Prohibition" - Regulation 2 is part of a broader framework intended to bring within its ambit those who would have access to or could access unpublished price-sensitive information about any company or class of companies - [PIT - Regulation 2].
• "Civil and Criminal Proceedings" - Insider trading is penalized under the SEBI Act, and both civil and criminal proceedings may be initiated against a person who has engaged in insider trading, as enabled by the definitions in Regulation 2 - [Insider Trading Regulations: Implications for M&A].
• "Severe Penalties" - Violations of the SEBI Regulations and securities laws subject insiders to severe penalties including disgorgement proceedings, fines, and imprisonment, which are predicated on the definitions established herein - [Prohibition of Insider Trading Policy].
• "Penalty Quantum" - Under Section 15G of the SEBI Act, penalties for violations can be up to Rs. 25 crores or three times the profit made, whichever is higher - [SEBI Insider Trading Regulations Overview].
• "Investor Protection Rationale" - The regulations are made to protect the interests of investors in securities and to promote the development of, and to regulate, the securities market - [Securities and Exchange Board of India (Prohibition of Insider Trading)].
• "M&A Implications" - The definition of insider and UPSI has significant implications for M&A transactions, as such transactions often involve the movement of price-sensitive information - [Insider Trading Regulations: Implications for M&A].
• "Equality of Access" - The regulation aims to ensure that no person has an unfair advantage by trading on information not available to the public, thereby establishing a level playing field - [SEBI (Prohibition of Insider Trading) Regulations, 1992].
• "Repeal and Replacement" - The 1992 regulations were subsequently repealed and replaced by SEBI (Prohibition of Insider Trading) Regulations, 2015, but Regulation 2's foundational role in defining key terms remained consistent - [SEBI (Prohibition of Insider Trading) Regulations - MISM].
• "Company Action Non-Preclusion" - The action by the company shall not preclude SEBI from taking any action in case of violation, meaning the regulatory body retains independent enforcement power - [Securities and Exchange Board of India (Prohibition of Insider Trading)].
• "New Industry Classification" - Comparative studies note the evolution of insider trading regulations from 1992 to later versions, reflecting the regulatory response to market developments - [Comparative Study Of Insider Trading Regulations 1992].
• "Broader Company Coverage" - The new regulations state that an insider should not share UPSI not only on a listed company but also a company that is about to be listed, expanding the scope beyond just listed entities - [Comparative Study Of Insider Trading Regulations 1992].
• "Regulatory Authority" - Section 12-A of the SEBI Act, 1992, empowers SEBI to regulate matters of insider trading and under this section, it is also empowered to publish guidelines, underpinning the authority behind Regulation 2 - [SEBI (Prohibition of Insider Trading) Regulations, 2015].
• "Evidence Consideration" - In enforcement, the consideration of evidence and findings is crucial; as violations alleged are not established, no penalty is imposed, highlighting the evidentiary standards tied to the regulation's definitions - [SEBI (Prohibition of Insider Trading) Regulations, 1992].

Reg.3 Prohibition on dealing communication or counselling on matters relating to inside trading

       No insider shall -
       (i) either on his own behalf or on behalf of any other person, deal in securities of a company listed on any sk exchange 1[when in possession of] of any unpublished price sensitive information;
       or
       2[(ii) communicate, counsel or procure, directly or indirectly, any unpublished price sensitive information to any person who while in possession of such unpublished price sensitive information shall not deal in securities.
       Provided that nothing contained above shall be applicable to any communication required in the ordinary course of business 5[or profession or employment]or under any law]
       2a[(iii) ***]
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Reg.3(a) .

       3[3A. No company shall deal in the securities of another company or associate of that other company while in possession of any unpublished price sensitive information.]
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3. Inserted by the SEBI (Insider Trading) (Amdt.) Regulations, 2002 w.e.f. 20.02.2002

Reg.3(b) .

       In a proceeding against a company in respect of regulation 3A, it shall be a defence to prove that it entered into a transaction in the securities of a listed company when the unpublished price sensitive information was in the possession of an officer or employee of the company, if:
       (a) the decision to enter into the transaction or agreement was taken on its behalf by a person or persons other than that officer or employee; and
       (b) such company has put in place such systems and procedures which demarcate the activities of the company in such a way that the person who enters into transaction in securities on behalf of the company cannot have access to information which is in possession of other officer or employee of the company; and
       (c) it had in operation at that time, arrangements that could

Reg.4 .

       Any insider, who deals in securities 4[***] in contravention of the provisions of regulation 3 3[or 3A] shall be guilty of Insider trading.
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       3. Inserted by the SEBI (Insider Trading) (Amdt.) Regulations, 2002 w.e.f. 20.02.2002
       4. The words communicates any information or counsels any person dealing in securities omitted by SEBI (Insider Trading) (Amdt.) Regulations, 2002 w.e.f. 20.02.2002

Reg.4(a) 1[Power to make inquiries and inspection

       (1) If the Board suspects that any person has violated any provision of these regulations, it may make inquiries with such persons or any other person as mentioned in clause (i) of sub-section (2) of Section 11 as deemed fit, to form a prima facie opinion as to whether there is any violation of these regulations.
       (2) The Board may appoint one or more officers to inspect the books and records of insider(s) or any other persons as mentioned in clause (i) of sub-section (2) of Section 11 for the purpose of sub-regulation (1).]
       Board's right to investigate
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1. Inserted by the SEBI (Insider Trading) (Amdt.) Regulations w.e.f. 20.02.2002

Reg.5 .

       .(1) Where the Board, 2[is of prima facie opinion] that it is necessary to investigate and inspect the books of account, other records and documents of an insider 1[or any other person mentioned in clause (i) of sub-section (1) of section 11 of the Act] for any of the purposes specified in sub-regulation (2), it may appoint an investigating authority for the said purpose.
       (2) The purposes referred to in sub-regulation (1) may be as follows :
       (a) to investigate into the complaints received from investors, intermediaries or any other person on any matter having a bearing on the allegations of insider trading; and
       (b) to investigate suo-moto upon its own knowledge or information in its possession to protect the interest of investors in securities against breach of these regulations.
 

Reg.6 Procedure for investigation

       (1) Before undertaking an investigation under regulation 5 the Board shall give a reasonable notice to insider for that purpose.
       (2) Notwithstanding anything contained in sub-regulation (1), where the Board is satisfied that in the interest of investors or in public interest no such notice should be given, it may by an order in writing direct that the investigation be taken up without such notice.
       (3) On being empowered by the Board, the investigating authority shall undertake the investigation and inspection of books of accounts and insider 1[or any other person mentioned in clause (i) of sub-section (1) of section 11 of the Act] against whom an investigation is being carried out shall be bound to discharge his obligations as provided in regulation 7 .
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Reg.7 Obligations of insider on investigation by the Board

       .(1) It shall be the duty of every insider, who is being investigated, 1[or any other person mentioned in clause (i) of sub-section (1) of section 11 of the Act] to produce to the investigating authority such books, accounts and other documents in his custody or control and furnish the authority with the statements and information relating to the transactions in securities market within such time as the said authority may require.
       (2) The insider 1[or any other person mentioned in clause (i) of sub-section (1) of section 11 of the Act] shall allow the investigating authority to have reasonable access to the premises occupied by such insider and also extend reasonable facility for examining any books, records, documents and computer data in his possession of the sk- broker or any other person and also provide copies of documents or other materials which, in the opinion of the inves

Reg.8 Submission of Report to the Board

       The investigating authority shall, within 3[reasonable in time]of the conclusion of the investigation submit an investigation report to the Board.
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3. Substituted for the words “one month” by the SEBI (Insider Trading) (Amdt.) Regulations w.e.f. 20.02.2002

Reg.9 Communication of Findings, etc.

       4[9(1) The Board shall, after consideration of the investigation report communicate the findings to the person suspected to be involved in insider trading or violation of these regulations.
       (2) The person to whom such findings has been communicated shall reply to the same within 21 days; and
       (3) On receipt of such a reply or explanation, if any, from such person, the Board may take such measures as it deems fit to protect the interests of the investors and in the interests of the securities market and for the due compliance of the provisions of the Act, the Regulations made thereunder including the issue of directions under regulation 11.]
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       4. Substituted by the SEBI (Insider Trading) (Amdt.) Regulations, 2002

Reg.10 Appointment of Auditor

       Notwithstanding anything contained in 1[regulation 4A and] regulation 5 , the Board may appoint a qualified auditor to investigate into the books of account or the affairs of the insider 1[or any other person mentioned in clause (i) of sub-section (1) of section 11 of the Act];
       Provided that, the auditor so appointed shall have the same powers of the inspecting authority as stated in regulation 5 and the insider shall have the obligations specified in regulation 7 .
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1. Inserted by the SEBI (Insider Trading) (Amdt.) Regulations w.e.f. 20.02.2002

Reg.11 Directions by the Board

       5[11 - The Board may without prejudice to its right to initiate criminal prosecution under section 24 or any action under Chapter VIA of the Act, to protect the interests of investors and in the interests of the securities market and for due compliance with the provisions of the Act, Regulations made thereunder issue any or all of the following order, namely:-
       (a). directing the insider or such person as mentioned in clause (i) of sub-section (2) of section 11 of the Act not to deal in securities in any particular manner;
       (b). prohibiting the insider or such person as mentioned in clause ( i ) of sub-section (2) of section 11 of the Act from disposing of any of the securities acquired in violation of these Regulations;
       (c). restraining the insider to communicate or counsel any person to deal

Reg.11(a) 6[Manner of service of summons and notices issued by the Board

       A summons or notice issued by the Board under these regulations may be served in the manner provided in regulation 22 of the Securities and Exchange Board of India (Procedure for Holding Enquiry by Enquiry Officer and Imposing Penalty) Regulations, 2002.]
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6. Inserted by the Securities and Exchange Board of India (Manner of Service of Summons and Notices issued by the Board) (Amendment) Regulations, 2007, Notification No. SEBI/LAD/DOP/2232/2007 dated 23.04.2007.

Reg.12 Code of internal procedures and conduct for listed companies and other entities.

       (1) All lised companies and organisations associated with securities markets including:
       (a) the intermediaries as mentioned in section 12 of the Act, asset management company and trustees of mutual funds;
       (b) the self regulatory organisations recognised or authorised by the Board;
       (c) the recognised sk exchanges and clearing house or corporations;
       (d) the public financial institutions as defined in Section 4A of the Companies Act, 1956; and
       (e) the professional firms such as auditors, accountancy firms, law firms, analysts, consultants, etc., assisting or advising listed companies,
       shall frame a code of internal procedures and conduct as near there to the

Reg.13 10[Disclosure of interest or holding in listed companies by certain persons Initial Disclosure.]

       (1) Any person who holds more than 5% shares or voting rights in any listed company shall disclose to the company 8[in Form A], the number of shares or voting rights held by such person, on becoming such holder, within 4 working days of:-
       a. the receipt of intimation of allotment of shares; or
       b. the acquisition of shares or voting rights, as the case may be.
       (2) Any person who is a director or officer of a listed company, shall disclose to the company 8[in Form B], the number of shares or voting rights held by such person, within 4 working days of becoming a director or officer of the company.
       11[(2A) Any person who is a promoter or part of promoter group of a listed company shall disclose to the company in Form B the number of shares or voting

Reg.14 Violation of provision relating to disclosure

       (1) A person who violates provisions of regulation 12 shall be liable for action under Section 11 or 11 B and/or Section 24 of the Act.
       (2)A person who violates provisions of regulation 13 shall be liable for action as specified in regulation 11 or Sections 11, 11B or action under Chapter VIA or section 24 of the Act.]

Reg.15 2[15. Appeal to the Securities Appellate Tribunal

       Any person aggrieved by an order of the Board under these regulations may prefer an appeal to the Securities Appellate Tribunal]
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2. Regulation 12 renumbered as Reglation 15 and substituted by SEBI (Insider Trading) (Amdt) Regulations, 2002 w.e.f. 20.02.2002. Prior to substitution Regulation 12 read as under :

Sch.1 SCHEDULE I

       1[SCHEDULE I
       [Under regulation 12(1)]
       PART A
       Model Code of Conduct for Prevention of Insider Trading for Listed Companies
       1.0 Compliance Officer
       1.1 The listed company has appointed a compliance officer (senior level employee) who shall report to the Managing Director/Chief Executive Officer.
       1.2 The compliance officer shall be responsible for setting forth policies, procedures, monitoring adherence to the rules for the preservation of "Price Sensitive Information", pre-clearing of designated employees and their dependents trades (directly or through respective department heads as decided by the company), monitoring of trades and the implem

Sch.2 SCHEDULE II

       SCHEDULE II
       [see under regulation 12(2) ]
       CODE OF CORPORATE DISCLOSURE PRACTICES FOR PREVENTION OF INSIDER TRADING
       1.0 Corporate Disclosure Policy
       1.1 To ensure timely and adequate disclosure of price sensitive information, the following norms shall be followed by listed companies:-
       2.0 Prompt disclosure of price sensitive information
       2.1 Price sensitive information shall be given by listed companies to sk exchanges and disseminated on a continuous and immediate basis.
       2.2 Listed companies may also consider ways of supplementing information released to sk exchanges by improving investor access to their p

Sch.3 8[SCHEDULE III

       8[SCHEDULE III
       FORMS
       FORM A
       Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 1992 (Regulation 13 (1) and (6)
       Regulation 13(1) -- Details of acquisition of 5% or more shares in a listed company
       Name & address of shareholder with telephone number Shareholding prior to acquisition No. and percent age of shares /voting rights acquired Date of receipt of allotment /advice. Date of acquisition (specify) Date of intimation to Company
       
       
       Mode of acquisition (market purchase/public/ rights/ preferential offer etc.) Shareholding subsequen