Capital Market and Securities Laws · Prohibition of Insider Trading

Insider Trading Disclosures and Trading Window Restrictions

Updated 11 October 2026 · Fact-checked

Under the SEBI PIT Regulations, promoters, directors, KMPs and designated persons must disclose holdings and trades: initial on appointment, continual when trades cross the threshold, and event-based when the company asks. Designated persons cannot trade while the trading window is closed, need pre-clearance above a set value, and cannot make a contra trade within six months.

Understand Disclosures and Trading Window Restrictions

Section 12A of the SEBI Act, 1992 bars anyone from engaging in insider trading or dealing in securities while in possession of material or non-public information. The old insider trading section of the Companies Act, 2013 (section 195) was omitted with effect from 9 February 2018. So the working rules sit in the SEBI (Prohibition of Insider Trading) Regulations, 2015, called the PIT Regulations here.

The prohibition alone is hard to police. So the PIT Regulations add three tools: disclosures (so SEBI and the exchanges can see who holds and trades), the trading window (a time block when insiders at the core of the company cannot trade), and trade controls such as pre-clearance and the contra trade ban. These tools work on a simple idea: remove the chance to trade when UPSI may exist, and leave a paper trail for every trade.

Disclosures come in three types. Initial disclosure is a snapshot of holdings when a person becomes a promoter, director or KMP. Continual disclosure reports trades once they cross a value threshold in a calendar quarter. Event-based disclosure is made when the company asks, in a form and at a frequency it decides, from other connected persons.

The trading window applies to designated persons and their immediate relatives. The compliance officer closes it when these persons can reasonably be expected to have UPSI. In practice it is closed from the end of every quarter until 48 hours after the financial results are declared. Pre-clearance applies to trades above a value set by the Board in the code of conduct, and the trade must follow within seven trading days. A contra trade is a trade opposite to the earlier one, such as a sale after a buy, within six months.

The compliance officer is the person who runs all this. He or she grants pre-clearance, closes and reopens the window, and keeps the records. Remember that these controls apply on top of the main ban. Trading in a open window or with pre-clearance does not protect you if you actually hold UPSI.

Key rules to remember

Initial disclosure (new appointee): Within 7 days of appointment, or of becoming a promoter, KMP or director; The disclosure is to the company and states securities held at the time of appointment or becoming a promoter. Existing persons had a one-time disclosure within 30 days of the Regulations coming into force.
Continual disclosure by the person: Within 2 trading days of the transaction, if traded value over a calendar quarter exceeds ₹10 lakh (or other value SEBI specifies); Applies to promoters, members of the promoter group, designated persons and directors. The test is the aggregate value in the quarter, not each trade.
Continual disclosure by the company: Company informs stock exchanges within 2 trading days of receiving the disclosure or becoming aware of the trade; The exchanges then place the information on their websites.
Trading window closure: Closed from end of every quarter until 48 hours after declaration of financial results; The compliance officer may also close it at other times when designated persons may have UPSI. Designated persons cannot trade while it is closed.
Pre-clearance validity: Trade must be executed within 7 trading days of approval; Applies above the threshold value set by the Board in the code of conduct. If not executed in time, get fresh pre-clearance. The applicant also declares that he or she has no UPSI.
Contra trade restriction: No opposite trade within 6 months of the previous trade by a designated person; If a contra trade is done, profit is disgorged and remitted to the Investor Protection and Education Fund administered by SEBI. The trading window and pre-clearance rules apply separately.

How to solve Disclosures and Trading Window Restrictions questions

Use this method for any question that asks whether a person has complied with the disclosure, trading window or trade control rules.

1Identify the person: promoter, member of promoter group, director, KMP, designated person, or other connected person. The type of disclosure depends on this.
2Identify the disclosure type: initial, continual or event-based. Note the trigger, such as appointment or crossing the quarterly value.
3Apply the time limit: 7 days for initial disclosure by a new appointee, 2 trading days for continual disclosure, and 2 trading days for the company's report to the exchanges.
4Check the date against the trading window. If the trade falls between quarter end and 48 hours after results, it is barred for designated persons.
5Check pre-clearance: is the value above the Board's threshold, was approval taken, and was the trade done within 7 trading days?
6Check for a contra trade: is there an opposite trade within six months of an earlier one by the same designated person?
7Check for UPSI separately. Even a compliant trade is barred if the person holds UPSI (section 12A of the SEBI Act).
8Conclude clearly: state the provision, the facts, and the result, including the consequence such as disgorgement or SEBI action.

Quickest way: Four-question check

When to use it: Use when time is short, such as a 5-mark short answer or a fact-based case.

Who is the person, and what is the disclosure trigger?
What is the time limit: 7 days, 2 trading days, or 48 hours after results?
Is the window open, was pre-clearance taken, and was the trade done within 7 trading days?
Is there an opposite trade within 6 months? If yes, the profit goes to the IPEF.
Write the conclusion in one line, naming the rule breached or confirming compliance.

Common mistakes in Disclosures and Trading Window Restrictions

Saying the ₹10 lakh threshold applies to each single trade.
Students read 'trade' and think of one transaction.
Fix: The test is the aggregate traded value in a calendar quarter. Add up all trades in the quarter, and disclose once the total exceeds the threshold.
Mixing up the 7-day and 2-trading-day limits.
Both are short time limits and look alike.
Fix: Remember: 7 days is for the initial disclosure of a new appointee, and 2 trading days is for continual disclosure and the company's report to the exchanges.
Writing that the trading window reopens on the day results are declared.
Students forget the cooling period.
Fix: The window reopens 48 hours after the declaration of financial results, so the information has time to be absorbed by the market.
Treating pre-clearance or an open window as a defence against an insider trading charge.
Students see the controls as permission to trade.
Fix: These are compliance tools. The ban in section 12A on trading with UPSI still applies, whatever the window status.
Forgetting what happens to profit from a contra trade.
Students stop at 'contra trade is barred'.
Fix: State that the profit is disgorged and remitted to the Investor Protection and Education Fund administered by SEBI, and that SEBI may also take action.
Applying trading window and contra trade rules to all connected persons.
Students confuse connected persons with designated persons.
Fix: These controls bind designated persons (and their immediate relatives for the window). Other connected persons give event-based disclosures when the company asks.

Worked examples

Example 1

Mr. Rahul Verma was appointed an independent director of a listed company on 1 August 2027. He holds 2,000 shares of the company. In the quarter April to June 2027, Ms. Anita Rao, a designated person, bought shares worth ₹6 lakh on 5 April and ₹5 lakh on 20 May. Examine the disclosures required in each case.

Show the solution

Mr. Verma is a director, so initial disclosure applies. As a new appointee, he must disclose his holding to the company within 7 days of appointment, that is, by 8 August 2027.
The disclosure states the 2,000 shares held at the time of appointment.
For Ms. Rao, a designated person, continual disclosure applies once the aggregate traded value in a calendar quarter exceeds ₹10 lakh.
The 5 April trade of ₹6 lakh alone is below the threshold, so no disclosure is needed yet.
After the 20 May trade of ₹5 lakh, the aggregate is ₹6 lakh + ₹5 lakh = ₹11 lakh, which exceeds ₹10 lakh.
So Ms. Rao must disclose to the company within 2 trading days of the 20 May transaction.
The company must then inform the stock exchanges within 2 trading days of receiving the disclosure or becoming aware of the trade.

Answer: Mr. Verma must make his initial disclosure by 8 August 2027. Ms. Rao must make a continual disclosure within 2 trading days of 20 May 2027, when her quarterly total of ₹11 lakh crossed ₹10 lakh. The company must report this to the stock exchanges within 2 trading days of receiving it.

Example 2

Mr. Suresh Iyer, a designated person, bought 1,000 shares of his company at ₹200 on 10 January 2027. The company's trading window was open. On 20 May 2027 he sold all 1,000 shares at ₹260. Is the sale permitted? What is the consequence?

Show the solution

Mr. Iyer is a designated person, so the contra trade restriction applies to him.
His first trade was the purchase on 10 January 2027. The six-month period runs to 10 July 2027.
The sale on 20 May 2027 is an opposite trade within that period, so it is a contra trade.
The sale also needed pre-clearance if its value exceeds the Board's threshold, and it had to be executed within 7 trading days of approval. The window status must be checked for 20 May too.
Profit on the contra trade: (₹260 − ₹200) × 1,000 = ₹60,000.
Under the rule, this profit of ₹60,000 is to be disgorged and remitted to the Investor Protection and Education Fund administered by SEBI.
SEBI can also take action for the violation of the Regulations.

Answer: The sale is a contra trade within six months of the purchase and is not permitted. The profit of ₹60,000 must be disgorged and remitted to the Investor Protection and Education Fund administered by SEBI. He could have sold without a contra trade only after 10 July 2027, subject to the other controls.

Exam tips

Learn the three numbers 7, 2 and 48: 7 days for a new appointee, 2 trading days for continual disclosure, 48 hours after results for reopening the window.
In fact-based questions, do the date arithmetic and write it out. Marks follow the working.
Write answers in ICSI style: the provision, then the facts, then a clear conclusion. Cite section 12A of the SEBI Act for the main prohibition, and name the PIT Regulations for the controls.
Always separate the controls (window, pre-clearance, contra trade) from the main ban on trading with UPSI. Say both apply.
For short notes on the trading window, include who closes it, when, who is bound, and when it reopens.

Practice questions from Prohibition of Insider Trading

Disclosures and Trading Window Restrictions: frequently asked questions

What is the difference between initial and continual disclosure under the PIT Regulations?

Initial disclosure is a one-time statement of holdings when a person becomes a promoter, director or KMP. Continual disclosure is made later, when trades in a calendar quarter exceed the specified value. The person discloses to the company, and the company informs the stock exchanges.

When does the trading window close and reopen?

It closes from the end of every quarter and reopens 48 hours after the financial results are declared. The compliance officer can also close it at other times when designated persons may have UPSI. Designated persons cannot trade while it is closed.

What is a contra trade and what is the six-month rule?

A contra trade is a trade opposite to an earlier one, such as selling after buying. A designated person should not make a contra trade within six months of the previous trade. If it happens, the profit is disgorged to the Investor Protection and Education Fund administered by SEBI.

Is pre-clearance needed for every trade by a designated person?

No. It is needed when the trade value is above the threshold set by the Board in the code of conduct. The trade must be executed within seven trading days of approval, or fresh approval is needed. The person also declares that he or she holds no UPSI.