The Securities and Exchange Board of India, through Circular No. SEBI/HO/ISD/ISD-PoD-2/P/CIR/2025/55 dated 21 April 2025, extended the automated trading window closure mechanism to include immediate relatives of designated persons in listed entities. The circular applies to all entities with equity securities or convertible securities listed on recognised stock exchanges, with a phased implementation schedule commencing July 2025.
Background
Under the existing framework of the SEBI (Prohibition of Insider Trading) Regulations, 2015, listed entities are required to implement a trading window closure period around the declaration of financial results. Designated persons -- including directors, key managerial personnel, and others identified by the company -- are prohibited from trading during this closure period.
SEBI had previously mandated automated implementation of this trading restriction through PAN-based freezing of demat accounts for designated persons themselves. The April 2025 circular extends this automated mechanism to their immediate relatives, closing a gap that SEBI identified as a potential conduit for insider trading.
Under Regulation 2(1)(f) of the PIT Regulations, "immediate relative" means a spouse, parent, sibling, or child of the designated person or of the spouse, where such relative is either financially dependent on the designated person or consults them in taking trading decisions relating to securities.
Key Provisions
The circular establishes the following framework:
PAN-based automated freezing: Securities linked to the ISIN of the listed entity will be frozen in all demat accounts linked to the PAN of the immediate relative during the trading window closure period. This mirrors the mechanism already operational for designated persons.
Declaration obligations: Designated persons must accurately declare and maintain updated PAN details of their immediate relatives with the listed entity. The responsibility for accurate and timely disclosure rests with the designated person.
Pre-closure data upload: Listed entities must confirm and upload the PAN data of immediate relatives to the stock exchanges and depositories at least two trading days before the commencement of the trading window closure.
Phased implementation timeline:
- 1 July 2025: Top 500 companies by BSE market capitalisation as of 31 March 2025
- 1 October 2025: All remaining listed entities, including companies that list after the date of the circular
Scope exclusions: Infrastructure Investment Trusts, Real Estate Investment Trusts, and debt-listed entities are excluded from this circular.
Implications for Practitioners
This circular significantly expands the compliance burden on listed entities and designated persons. The most immediate practical challenge is the collection and verification of PAN details for all immediate relatives of every designated person. Given the breadth of the definition -- which includes parents, siblings, and children of both the designated person and their spouse -- the data collection exercise could be substantial.
Compliance officers should initiate the PAN collection process well before the July 2025 deadline for top 500 companies. Delays in data submission could result in designated persons' relatives being unable to trade at any time, as incomplete data could trigger precautionary freezing.
For securities litigation practitioners, the automated freezing mechanism creates a new category of potential disputes. Relatives who are frozen from trading due to their familial connection -- but who have no actual access to unpublished price sensitive information -- may challenge the proportionality of this measure. The definition's reliance on financial dependence and consultation in trading decisions introduces factual questions that may need to be resolved on a case-by-case basis.
Listed entities should also review and update their codes of conduct under the PIT Regulations to incorporate these expanded obligations.