SAT rules non-connected individuals may qualify as insiders under SEBI PIT Regulations if they possess UPSI, expanding insider liability beyond formal corporate connections.
Non-Connected Person Can Be Insider Under PIT Rules
In a significant clarification, the Securities Appellate Tribunal (SAT) affirmed that a person need not be formally 'connected' to a listed company to qualify as an insider under the SEBI (Prohibition of Insider Trading) Regulations, 2015. Liability arises if the individual is in possession of or has access to Unpublished Price Sensitive Information (UPSI), regardless of their official designation.
This interpretation reinforces Regulation 2(1)(g) of the PIT Regulations, which defines an insider as any person who has access to UPSI, directly or indirectly. The ruling underscores that insider status is functional, not merely relational. As a result, consultants, advisors, and transaction intermediaries may be deemed insiders during deal phases, even without board or employment ties.
For legal practitioners, this expands the scope of compliance obligations under PIT frameworks. Entities must ensure robust UPSI protocols, including confidentiality agreements and restricted communication channels, extending beyond traditional insiders to third parties in information flows. Regular training and policy updates are essential to mitigate unintentional violations.
