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Intermediate ⏱️ 6 min 📅 August 2026

PIT Regulations

Prohibition of Insider Trading regulations define who is an insider, what constitutes unpublished price-sensitive information, and the surveillance mechanisms that catch violators.

1. What Is Insider Trading?

Insider trading is the buying or selling of a company's securities by someone who possesses unpublished price-sensitive information (UPSI) about that company. SEBI's Prohibition of Insider Trading (PIT) Regulations, 2015 (as amended) govern this area.

2. Who Is an "Insider"?

SEBI defines an insider broadly. You don't need to work for the company to be an insider. Categories include:

  • Connected persons: Directors, officers, employees, auditors, consultants, lawyers, bankers
  • Immediate relatives: Spouse, parents, siblings, children of connected persons
  • Persons in possession of UPSI: Anyone who has received material non-public information

The "person in possession" category is broad — if your friend who works at Infosys tells you about an upcoming acquisition, and you trade on it, you're an insider under SEBI's definition.

3. What Constitutes UPSI?

Unpublished Price-Sensitive Information includes:

  • Financial results (before official announcement)
  • Dividend declarations
  • Merger, demerger, acquisition, or delisting plans
  • Major expansion or contraction plans
  • Changes in key management personnel
  • Debt defaults or credit events
  • Significant litigation outcomes

The key word is "unpublished." Once SEBI or the company officially discloses the information to stock exchanges, it's no longer UPSI.

4. The Trading Window

Designated insiders and their immediate relatives cannot trade during the "trading window closure" period. This typically includes:

  • From the end of the quarter until 48 hours after financial results are declared
  • During any period when UPSI exists
  • As specified by the company's internal code of conduct

Insiders must also pre-clear trades above certain thresholds and report all trades within prescribed timelines.

5. SEBI's Surveillance and Enforcement

SEBI uses sophisticated tools to detect insider trading:

  • Integrated Market Surveillance System (IMSS): Flags unusual price/volume movements before announcements
  • Call data records: Can be obtained to establish communication between insiders and traders
  • Bank and demat records: Traced to identify beneficiaries of trades
  • Social network analysis: Maps relationships between company officials and traders

6. Penalties: Severe and Getting Worse

SEBI's penalties for insider trading have become increasingly severe:

  • Monetary penalty: Up to ₹25 crore or 3x the profits made, whichever is higher
  • Disgorgement: Must return all profits (or losses avoided)
  • Debarment: Can be banned from securities markets for years
  • Criminal prosecution: Serious cases are referred to economic offences authorities

High-profile cases include the Axis Mutual Fund front-running scandal, the RIL insider trading case, and numerous smaller cases against company promoters and their relatives.

7. How This Affects You as a Retail Investor

  1. Don't trade on tips: If someone gives you "inside information," using it makes you liable
  2. Be careful on social media: Sharing or acting on leaked information is punishable
  3. Understand that enforcement is real: SEBI actively pursues cases and has a high conviction rate in well-documented cases

💡 Key Takeaway

Insider trading isn't just about corporate executives. If you trade on material non-public information — regardless of how you obtained it — you're liable. The "trading on tips" culture in Indian markets is legally dangerous.