A senior executive knows the quarterly numbers will beat expectations. Results go public on Friday. On Wednesday she buys shares, telling herself she would have bought anyway. That last part is true and it does not matter — she traded while holding unpublished price-sensitive information, and the penalty can reach the higher of ₹25 crore or three times her gain, before any criminal exposure.
The PIT Regulations ban trading in a listed company's securities while you possess unpublished price-sensitive information, and ban passing that information on except for a legitimate purpose — and since 10 June 2025 the definition of UPSI covers roughly 16 categories rather than five.
The bottom line
What is prohibited: trading while in possession of UPSI, and communicating UPSI outside a legitimate purpose. The tipper is liable whether or not they trade.
What changed in 2025: the amendment effective 10 June 2025 widened UPSI to roughly 16 categories aligned with LODR's material events. Companies must log UPSI in a structured digital database and close the trading window when insiders may hold it.
What it costs: the higher of ₹25 crore or three times the profit, plus imprisonment of up to 10 years.
What the PIT Regulations prohibit
The SEBI (Prohibition of Insider Trading) Regulations, 2015, in force since 15 May 2015, do two things.
Regulation 4 bars an insider from trading in securities while in possession of UPSI. Read the word carefully: possession, not use. You do not have to act because of the information for the prohibition to bite.
Regulation 3 bars communicating UPSI to anyone, or procuring it from anyone, except where it is needed for a legitimate purpose, to perform duties, or to discharge a legal obligation. The person who passes the information is liable even if they never buy or sell a share.
What counts as UPSI
Regulation 2(1)(n) sets two limbs, and information is UPSI only when both are satisfied.
- Unpublished — not "generally available", meaning not accessible to the public on a non-discriminatory basis. Dissemination through the stock exchanges is the gold standard.
- Price sensitive — likely to materially affect the price of the securities once it does become generally available.
Two consequences get missed. A rumour circulating widely on social media is not generally available merely because it is circulating. And information is price sensitive in either direction: bad news is UPSI exactly as much as good news.
The expanded list, from 10 June 2025
For years Regulation 2(1)(n) leaned on five illustrative categories — financial results, dividends, capital-structure changes, mergers, changes in key personnel — and a good many companies treated everything outside them as fair game.
The SEBI (PIT) (Amendment) Regulations, 2025 closed that gap by aligning UPSI with Regulation 30 and Schedule III of LODR, taking the list to roughly 16 categories. The additions include:
- decisions on proposed fund raising;
- agreements which may impact the management or control of the company;
- initiation of a forensic audit for financial misstatement, siphoning or diversion of funds, and receipt of the final report;
- fraud or defaults by the company, its promoters, directors, KMP or a subsidiary, and arrests of key persons;
- changes in ratings, other than ESG ratings;
- resolution plans and restructuring of loans or borrowings;
- one-time settlements with banks, and admission into insolvency proceedings;
- grant, withdrawal, surrender, cancellation or suspension of key licences or regulatory approvals;
- guarantees, indemnities or surety given for third parties outside the normal course of business;
- material litigation or disputes, and awards or orders of regulators, courts or tribunals.
The amendment brought two flexibilities with it. UPSI originating outside the company can be entered in the database within 2 calendar days of receipt, and the trading window need not close for such externally sourced UPSI where designated persons are unlikely to hold it.
When UPSI stops being UPSI
Under Regulation 2(1)(e), information stops being unpublished once it is generally available, which in practice means dissemination through the stock exchanges. That is why trading windows reopen only 48 hours after results are declared: the market is given time to absorb the disclosure.
Selective disclosure achieves nothing here. Telling one analyst, one fund or one journalist does not make information generally available. It multiplies the number of insiders.
Who is an insider
An insider is anyone who is a connected person, or who is in possession of or has access to UPSI. Possession alone is enough, and no job title is required.
A connected person is anyone associated with the company in the six months before the act, in a position giving access to UPSI — directors, employees, bankers, auditors, lawyers, consultants.
Immediate relatives of connected persons are presumed to be connected, and the presumption reverses the burden of proof. It is for them to show they had no access, not for SEBI to show they did.
The trading window
The trading window is the period in which designated persons may deal in the company's securities. It closes whenever UPSI is likely to exist, most obviously from the end of a quarter until 48 hours after results are published.
While it is shut, designated persons cannot trade even with pre-clearance. While it is open, trades above the prescribed value still need pre-clearance from the compliance officer, and a contra-trade within six months of an earlier trade is barred.
The structured digital database
Regulations 3(5) and 3(6) require every listed company to maintain a structured digital database recording the nature of each item of UPSI, along with the names and PANs of everyone who shared it and everyone who received it. Entries need time-stamped, non-tamperable audit trails and must be preserved for at least eight years. Externally sourced UPSI — a regulator's communication, an acquirer's approach — has to reach the database within 2 calendar days of receipt.
In practice the SDD is where an investigation starts. If someone traded profitably and the database shows they were in on the UPSI, most of the case is already built. If the database is incomplete, the company faces action for that lapse on its own account. Keep it contemporaneous: retro-fitted entries surface in the audit trail, and they are worse than no entry at all.
Trading plans
Regulation 5 lets someone permanently in possession of UPSI — a CFO, for instance — trade lawfully by committing to trades well in advance and then losing all discretion over them.
SEBI eased the mechanics in 2024. The cool-off between submitting a plan and its first trade came down from six months to 120 days, and the minimum plan duration from twelve months to two consecutive quarters. The compliance officer approves the plan, it is disclosed to the exchanges, and once approved it is irrevocable.
The penalties
Sections 11, 11B, 11(4), 15G, 15HB and 24 of the SEBI Act, 1992 supply the machinery.
- Adjudication under Section 15G: trading on UPSI, communicating it, or procuring it each attract a penalty of not less than ₹10 lakh, up to ₹25 crore or three times the profit made, whichever is higher. Related lapses such as disclosure defaults and code violations fall under separate provisions including 15A and 15HB.
- Directions under Sections 11, 11B and 11(4): SEBI can restrain a person from the securities market, suspend them from holding office in listed companies, freeze alleged gains through interim orders often passed without hearing them first, and order disgorgement — profits handed back with interest, credited to the Investor Protection and Education Fund.
- Prosecution under Section 24: imprisonment up to 10 years, or a fine up to ₹25 crore, or both. These prosecutions are rare but real, and settlement is unavailable for serious, market-wide frauds.
- Settlement: many PIT matters end through SEBI's settlement mechanism, with monetary terms, voluntary debarment and disgorgement, and no admission of guilt.
The three-times multiplier is what insiders underestimate. On a large gain it dwarfs the ₹25 crore figure entirely, and no amount of after-the-fact rationalisation helps once possession and trading coincide.
Who ends up in default
Regulations 3, 4, 9 and 10 spread liability across five groups.
- The trading insider — the person who dealt while in possession of UPSI, under Regulation 4.
- The tipper — the insider who communicated UPSI outside a legitimate purpose, under Regulation 3(1). Forwarding unpublished results in a WhatsApp group is communication of UPSI, whatever the sender intended by it.
- The tippee — the person who procured or induced communication of UPSI under Regulation 3(2), and traded.
- Immediate relatives and connected persons — presumed to possess UPSI, with the burden reversed onto them.
- The listed company and its compliance officer — for Code of Conduct failures, missed exchange reporting and gaps in the database.
The cases that shaped the rule
Hindustan Lever v SEBI (1998), on what "unpublished" means. HLL bought 8 lakh shares of Brooke Bond Lipton from UTI weeks before the HLL–BBLIL merger was announced, and SEBI treated HLL as an insider trading on unpublished merger information. The appellate authority set the compensation direction aside, reasoning that the impending merger had already been widely reported and was therefore generally known. The case forced Indian law to sharpen what unpublished actually means.
Rakesh Agrawal v SEBI (SAT, 2004), on motive. The managing director of ABS Industries bought shares through his brother-in-law ahead of Bayer's takeover, knowing the deal. SAT accepted he possessed UPSI but found he had acted to help the acquisition succeed in the company's interest, which diluted the charge under the 1992 regulations. The 2015 regulations answered this case directly by making possession, rather than motive, the operative test.
SEBI v Abhijit Rajan (Supreme Court, 2022), on the direction of advantage. Gammon Infrastructure's managing director sold shares before the company announced the termination of certain shareholder agreements. The Court held that the terminated contracts were a small fraction of the order book, and that he had sold against his informational advantage rather than exploiting it. The judgment reintroduced a narrow profit-motive lens, but only where the trade runs contrary to what the information would suggest.
Balram Garg v SEBI (Supreme Court, 2022), on proximity. A family relationship alone does not establish that UPSI was communicated. Cogent evidence of actual communication is needed, though trading patterns together with proximity can still build a circumstantial case.
Disclosure obligations
Regulations 6 and 7 carry two duties.
- Initial disclosure: every promoter, member of the promoter group, KMP and director discloses their holdings within 7 days of appointment, or of becoming a promoter.
- Continual disclosure under Regulation 7(2): promoters, the promoter group, designated persons and directors disclose to the company within 2 trading days every trade, or series of trades in a calendar quarter, whose value exceeds ₹10 lakh. The company passes it to the exchanges within 2 trading days of receipt.
A worked example
A designated person learns of an unannounced large order win — UPSI under the expanded 2025 list — buys shares for ₹40 lakh and sells after the announcement for ₹70 lakh. A profit of ₹30 lakh.
Under Section 15G the adjudicating officer may impose up to ₹25 crore, or three times ₹30 lakh, whichever is higher. So up to ₹25 crore, with ₹10 lakh as the floor. In parallel, a direction under Section 11B can disgorge the ₹30 lakh with interest and debar him from the market for years, and the company must report the code violation to the exchanges. If SEBI prosecutes under Section 24, imprisonment up to 10 years is on the table.
A ₹30 lakh gain, in other words, carries a worst case several orders of magnitude larger than itself.
Common mistakes
- Testing only against the old five categories. The list runs to roughly 16 now, and fund-raising decisions, forensic audits, licence actions and control-impacting agreements are expressly in it.
- Treating a rumour as generally available. Only non-discriminatory public dissemination kills UPSI.
- Believing motive is a defence. Possession while trading is enough, and Abhijit Rajan helps only where the trade runs against the insider's informational advantage.
- Tipping harmlessly. The communicator is liable under Regulation 3 whether or not they ever trade.
- Forgetting externally sourced UPSI. It has to reach the database within 2 calendar days.
- Reopening the trading window at announcement. It reopens 48 hours after the information becomes generally available.
- Assuming a small trade escapes notice. Surveillance flags pre-announcement trades of all sizes, and ₹10 lakh is a disclosure threshold rather than an enforcement floor.
- Discounting interim orders. Gains can be frozen and you can be barred from the market without being heard, years before the case is finally decided.
Frequently asked questions
What is UPSI in simple terms? Information about a company or its securities that is not yet public and that would likely move the price materially once it is. Both limbs have to be met.
What is the minimum penalty for insider trading? ₹10 lakh under Section 15G. The ceiling is ₹25 crore or three times the profit made, whichever is higher.
Can insider trading lead to jail in India? Yes. Section 24 of the SEBI Act provides for imprisonment up to 10 years, a fine up to ₹25 crore, or both.
Is profit necessary for liability? No. Trading while in possession of UPSI is the contravention. Profit only scales the penalty and the disgorgement.
Do I have to have used the information? No. Regulation 4 turns on possession, not use.
When did the expanded UPSI list take effect? 10 June 2025, ninety days from the March 2025 notification.
Are ESG rating changes UPSI? The 2025 amendment covers changes in ratings other than ESG ratings.
How long must the database be preserved? At least eight years, with time-stamped, non-tamperable audit trails, and longer where proceedings are pending.
Does a family relationship prove UPSI was shared? Not by itself. Balram Garg requires cogent evidence of actual communication.
Can a case be settled? Many PIT proceedings conclude under SEBI's settlement regulations, with monetary terms and voluntary restraints, subject to SEBI's discretion.
Primary sources
- Regulations 2(1)(e), 2(1)(n), 3, 4, 5, 6, 7, 9 and 10, SEBI (Prohibition of Insider Trading) Regulations, 2015
- SEBI (Prohibition of Insider Trading) (Amendment) Regulations, 2025 — notification dated 11 March 2025, effective 10 June 2025
- Sections 11, 11B, 11(4), 12A, 15G, 15HB and 24, SEBI Act, 1992
- Regulation 30 and Schedule III, SEBI (LODR) Regulations, 2015
- Hindustan Lever Ltd. v SEBI (1998); Rakesh Agrawal v SEBI (SAT, 2004); SEBI v Abhijit Rajan (SC, 2022); Balram Garg v SEBI (SC, 2022)