SEBI Insider Trading Rules Explained (2026)

Explainer · Securities Law · SEBI

Updated for 2026 · Claw Editorial

Insider trading is trading in a listed company’s shares while you hold price sensitive information the public does not have. It is prohibited by the SEBI (Prohibition of Insider Trading) Regulations, 2015. The rules turn on one idea: unpublished price sensitive information (UPSI). An insider must not trade while in possession of UPSI, and must not pass it on outside the ordinary course of business. This explainer sets out what UPSI is, who is an insider, the trading window, and the penalties. Last verified October 2026.

01Why the rules exist

Stock markets work on the idea that everyone trades on the same public information. When an insider trades on secret information, say a director who buys shares knowing results will beat expectations, that fairness breaks. The insider gains at the expense of ordinary investors.

The SEBI PIT Regulations, 2015 exist to stop this. They apply to listed companies and to a wide range of people connected to them, and they carry heavy penalties. For directors, promoters, employees and their advisers, knowing the rules is not optional, because an innocent-looking trade can draw an inquiry.

02Who is an insider

An insider is a person who is either a connected person, or who is in possession of or has access to UPSI. A connected person is someone associated with the company in a way that gives access to UPSI, directly or indirectly, such as a director, officer, employee, or a professional or business relationship.

The definition is wide on purpose. It catches not just board members and employees, but also advisers, bankers, auditors, and people connected to them, where they have access to UPSI. Being labelled an insider is not itself wrong; trading on UPSI is.

03What UPSI means

Unpublished price sensitive information is information, relating to a company or its securities, that is not generally available and that, when it becomes available, is likely to materially affect the price of the securities.

The regulations give examples of what ordinarily counts as UPSI:

• financial results;
• dividends;
• changes in capital structure;
• mergers, de-mergers, acquisitions, delistings, disposals and expansion of business;
• changes in key managerial personnel.

Information becomes "generally available" when it is accessible to the public on a non-discriminatory basis, usually through a stock exchange disclosure. Until then, it is UPSI.

04The two main prohibitions

The regulations rest on two prohibitions.

• Regulation 3 (communication): no insider shall communicate, provide, or allow access to UPSI to any person, and no person shall procure UPSI from an insider, except where it is needed in the legitimate ordinary course of business, or to discharge legal obligations.
• Regulation 4 (trading): no insider shall trade in securities that are listed or proposed to be listed when in possession of UPSI, subject to limited defences.

Together these stop both the trade and the leak. The rules also require companies to maintain a structured digital database of people with whom UPSI is shared, which creates an audit trail.

The rules stop two things: trading on unpublished price sensitive information, and passing that information to someone who can.

05Trading windows and defences

Listed companies run a trading window under a code of conduct. The window is closed during sensitive periods, most importantly before the declaration of financial results, and designated persons cannot trade while it is shut. This is a practical control to keep insiders out of the market when UPSI is likely to exist.

Regulation 4 allows limited defences, where the insider can show the trade was not motivated by UPSI, for example an off-market transfer between promoters who both had the same UPSI, a trade carried out under an approved trading plan, or a decision taken by different people without access to the UPSI. The burden to prove the defence is on the insider.

06Penalties and the appeal

Insider trading carries some of the heaviest penalties in Indian securities law. Under Section 15G of the SEBI Act, 1992, the penalty is a minimum of Rs 10 lakh and a maximum of Rs 25 crore, or three times the amount of profit made from the insider trading, whichever is higher.

SEBI can also disgorge the unlawful gain and bar the person from the securities market. Insider trading can additionally be prosecuted as an offence under Section 24 of the SEBI Act, which allows imprisonment of up to 10 years, or a fine of up to Rs 25 crore, or both.

An order of SEBI can be appealed to the Securities Appellate Tribunal (SAT), and from the SAT a further appeal lies to the Supreme Court under Section 15Z of the SEBI Act, within 60 days on a question of law.

07Where Claw fits

Claw is an all-in-one legaltech platform for Indian advocates, law firms, and corporate legal teams, combining AI-based case search, an AI legal assistant (Legal GPT), case management, and compliance automation across all Indian courts and tribunals.

An insider trading matter stands or falls on how SEBI, the Securities Appellate Tribunal and the Supreme Court have read UPSI, the Regulation 4 defences and the way profit and penalty are worked out, points settled across a long run of orders and judgments. Claw opens that record to you: more than 30 crore judgments, with Supreme Court rulings available from 1950, searched and returned in under 5 seconds, so you can see how the SAT has treated a defence or sized a penalty. It also follows a live securities matter on appeal, listing the cases, orders and hearings by party or advocate name across 9,102 courts, benches and forums. The documents you upload are never used to train Claw AI models.

Create a free Claw account and track your securities matter by party or advocate name. To search the wider body of law, see case search across Indian courts.

08Sources and further reading

• SEBI (PIT Regulations, 2015 and amendments): sebi.gov.in
• India Code (SEBI Act, 1992): indiacode.nic.in
• Claw: clawlaw.in

This explainer is general information, not legal advice. The PIT Regulations are amended often, so check the current consolidated text on the SEBI website and take advice from counsel before you act.

09Frequently asked questions