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The market regulator, the Securities and Exchange Board of India (Sebi) has proposed broadening the definition of linked persons under the Sebi (Prohibition of Insider Trading) Regulations, or (PIT) Regulations, to include further relatives.
Connected persons are those who are likely to have direct or indirect access to unpublished price-sensitive information (UPSI) as a result of their occupation or profession, as well as those related to them, such as parents, siblings and children. The regulator has suggested adding new types of relatives to the list of related persons.
Sebi has recommended a change to regulation 2(1)(d), which defines linked people, to substitute "relative" for "immediate relative" in a consultation document dated 29 July.
The proposed definition of "relative" of connected persons includes siblings of the spouse, siblings of the parents, any descendant or ascendant of a lineage, and all of their spouses. These individuals will also be considered connected persons.
The PIT Regulations' disclosure requirements and code of conduct would be the exclusive scope of the term "immediate relative" as stated in 2(1)(f).
The regulator has also suggested including six other categories of connected persons.
1. a firm, its partner or its employee in which a connected person specified in clause (i) is also a partner; Clause (i) broadly includes people who are employed with the company or have a contractual or fiduciary relationship with the company in the previous six months.
2. any person on whose advice, directions or instructions, a connected person specified in clause (i) is accustomed to act.
3. a body corporate whose board of directors, managing director or manager is accustomed to act in accordance with the advice, directions or instructions of a connected person specified in clause (i).
4. persons sharing a household or residence with a connected person specified in clause (i);
5. persons having material financial relationship with a connected person specified in clause (i) including for reasons of employment or financial dependency or frequent financial transactions;
6. a Hindu Undivided Family (HUF) where Karta or any of the member/coparcener is a connected person specified in clause (i) or a relative of connected persons specified in clause (i)
