“It has been observed that certain categories of persons who are not covered in the scope of the definition of ‘connected persons’ as per existing regulations, may also be in a position to have access to UPSI (unpublished price sensitive information) from ‘connected persons’ to a company, by virtue of their close relationship with such ‘connected persons’,” Sebi said in a discussion paper on Monday.
Such deemed connected persons, owing to their proximity and close relationship with the connected persons, are considered to be in such a position where they can potentially indulge in insider trading, the regulator said.
A connected person means a person who has a connection with the company that is expected to put him in possession of UPSI.
The regulator has also proposed to include more categories of connected persons.It said, a firm, its partner or its employee in which a connected person is also a partner. Any person on whose advice a connected person would act.Also, the proposed rules would cover a corporate body whose board of directors and managing director could act based on the directions of a connected person.Besides, a person sharing residence and having financial relationship with a connected person, Sebi said.
“It is intended that the relatives of a connected person too become connected persons for the purpose of these regulations. It is a rebuttable presumption that a connected person had UPSI,” Sebi said.