Capital Market and Securities Laws · Prohibition of Insider Trading

Insider, Connected Person and UPSI Definitions Explained

Updated 11 October 2026 · Fact-checked

Under the SEBI (Prohibition of Insider Trading) Regulations, 2015, an insider is a connected person or anyone in possession of or having access to unpublished price sensitive information (UPSI). UPSI is price-sensitive information that is not generally available. To answer questions, define each term, apply it to the facts, and conclude.

Understand Key Definitions: Insider, UPSI and Connected Person

Insider trading law starts with one idea: some people know important facts about a listed company before the public does. If they trade on those facts, other investors are treated unfairly. The SEBI (Prohibition of Insider Trading) Regulations, 2015 (PIT Regulations) are made under the SEBI Act, 1992. The definitions decide who is caught and what information matters.

There are two building blocks: the person and the information. The person is either a connected person or an insider. The information is unpublished price sensitive information (UPSI). If either block is missing, there is usually no insider trading problem.

Connected person is a status based on a relationship. It covers anyone who is or was associated with the company in the six months before the act in question, in a way that gives access to UPSI, or is reasonably expected to give it. Directors, officers and employees are the usual examples. Professionals such as auditors, lawyers, bankers and consultants who work with the company can also be connected. Certain relatives and some others are presumed to be connected persons unless they show otherwise.

Insider is wider. An insider is a connected person, or any person who is in possession of or has access to UPSI. So every connected person is treated as an insider, but a stranger who happens to receive UPSI is also an insider. That is the key difference. Connected person looks at the relationship. Insider looks at the relationship or the possession of UPSI.

UPSI means information that relates directly or indirectly to a company or its securities, is not generally available, and on becoming generally available is likely to materially affect the price of the securities. The regulations list examples: financial results, dividends, changes in capital structure, mergers, demergers, acquisitions, delistings, disposals, expansion of business, and changes in key managerial personnel. Generally available information is information accessible to the public on a non-discriminatory basis. Once information is generally available, it stops being UPSI.

Two more terms appear in questions. Trading includes subscribing to, buying, selling, dealing or agreeing to do so in securities. The compliance officer is a senior officer, usually a company secretary, who reports to the board and is responsible for compliance with the code of conduct, trading plans, preclearance and monitoring. Keep in mind that the Companies Act, 2013 section 195 on insider trading has been omitted. Today the SEBI Act and the PIT Regulations govern this subject.

Key rules to remember

Insider: Insider = connected person OR any person in possession of / having access to UPSI; Connected person is a subset of insider. Possession of UPSI alone makes someone an insider.
Connected person: Any person who is or has been associated with the company during the 6 months before the act, in a way that gives access (or reasonable expectation of access) to UPSI; Association can be through directorship, office, employment or a professional or business relationship. Remember the six-month look-back.
UPSI test: UPSI = relates to company or its securities + not generally available + likely to materially affect price once published; All three limbs must be met. Examples listed in the regulations include results, dividend, capital structure changes, mergers, demergers, acquisitions, delisting, disposals, expansion and key managerial personnel changes.
Generally available information: Information accessible to the public on a non-discriminatory basis; Once information is generally available it ceases to be UPSI. Selective disclosure to a few persons does not qualify.
Section 15G, SEBI Act, 1992: Penalty: not less than ₹10 lakh, up to ₹25 crore or three times the profits made, whichever is higher; Applies to an insider who deals on the basis of UPSI, communicates UPSI (except in the ordinary course of business or under law), or counsels or procures another to deal on UPSI.
Section 12A(d) and (e), SEBI Act, 1992: No person shall directly or indirectly engage in insider trading, or deal in securities while in possession of material or non-public information, or communicate it, in contravention of the Act, rules or regulations; This is the statutory prohibition behind the regulations.

How to solve Key Definitions: Insider, UPSI and Connected Person questions

Use this sequence for any question that asks you to define a term or decide whether a person is an insider.

1Identify the term or the person in question: insider, connected person, UPSI, generally available information, trading or compliance officer.
2State the definition in the words of the PIT Regulations, as closely as you can recall them.
3If the question is about a person, check for a relationship with the company in the six months before the act. Note whether it gives access to UPSI.
4If the relationship test fails, check whether the person possessed or had access to UPSI. If yes, the person is still an insider.
5If the question is about information, test the three limbs: relates to the company or securities, not generally available, and likely to materially affect price when published.
6Check whether the information has been made public on a non-discriminatory basis. If it has, it is not UPSI.
7Link to the consequence if needed: dealing or communicating attracts section 15G of the SEBI Act, 1992, and section 12A(d) and (e) prohibits the conduct.
8Write a clear conclusion that names the person as an insider or not, and the information as UPSI or not.

Quickest way: Two-question check: who and what

When to use it: Use for short-note questions and for fact-based questions when time is tight.

Ask: what is the information? Test it for price sensitivity and public availability. If it is public or not price sensitive, stop: it is not UPSI.
Ask: who holds it? If the person has a relationship with the company in the last six months, call them a connected person and so an insider.
If there is no relationship, ask whether the person still has UPSI. If so, call them an insider by possession.
Write the conclusion in one line, then add section 15G for the penalty if trading or communication is involved.

Common mistakes in Key Definitions: Insider, UPSI and Connected Person

Treating insider and connected person as the same thing.
Both terms appear together and the overlap is large.
Fix: Remember that every connected person is an insider, but an insider need not be a connected person. A stranger holding UPSI is an insider.
Ignoring the six-month look-back for connected persons.
Students read only the present tense in the definition.
Fix: Include the words 'is or has been associated during the six months prior to the concerned act'. A person who left four months ago can still be connected.
Calling any confidential information UPSI.
Confidential and price sensitive sound alike.
Fix: Test all three limbs. Information must be price sensitive and not generally available. Confidential but price-irrelevant data is not UPSI.
Assuming information stays UPSI after a leak or a rumour.
Students confuse press talk with official disclosure.
Fix: Generally available means accessible to the public on a non-discriminatory basis. A selective tip or an unverified rumour does not make it so, and an official stock exchange disclosure does.
Quoting the repealed Companies Act section 195 as the current law.
Older material still mentions it.
Fix: Say that section 195 of the Companies Act, 2013 stands omitted. Cite section 12A and section 15G of the SEBI Act, 1992 and the PIT Regulations.
Writing only the definition without applying it to the facts.
Students rush to recall and skip analysis.
Fix: Follow the ICSI pattern: provision, facts, conclusion. Always state whether the person is an insider and whether the information is UPSI.

Worked examples

Example 1

Rajesh was the statutory auditor of Sundaram Textiles Ltd, a listed company, until three months ago. During his engagement he learnt that the company would announce a merger. Rajesh bought shares of the company before the announcement. Is Rajesh an insider?

Show the solution

Provision: an insider is a connected person or any person in possession of or having access to UPSI. A connected person is one associated with the company during the six months before the act, in a way that gives access, or reasonable expectation of access, to UPSI.
Facts: Rajesh was auditor, a professional relationship, until three months ago. This falls within the six-month look-back. An auditor reasonably has access to price-sensitive information.
The merger is price-sensitive information that was not yet public. Mergers are listed in the regulations as examples of UPSI.
Rajesh is therefore a connected person and so an insider. He also had actual possession of UPSI.
Consequence: dealing in the shares on the basis of UPSI attracts section 15G of the SEBI Act, 1992, with a penalty of not less than ₹10 lakh, extending to ₹25 crore or three times the profit, whichever is higher.

Answer: Yes. Rajesh is a connected person within the six-month look-back and therefore an insider. His trading on the unannounced merger is insider trading, punishable under section 15G of the SEBI Act, 1992.

Example 2

Meera, a retired teacher with no link to Kaveri Pharma Ltd, overhears two employees of a bank discussing that the company's results will be sharply lower. The results have not been published. She sells her shares. Later the company publishes the results on the stock exchange. Discuss whether Meera is an insider and whether the information is UPSI.

Show the solution

Information test: financial results relate directly to the company and its securities. They are not generally available before publication. Sharply lower results are likely to materially affect the price. So before publication, the information is UPSI.
Person test: Meera has no relationship with the company, so she is not a connected person.
Possession test: she holds UPSI, though she got it by chance. An insider includes any person in possession of or having access to UPSI. So she is an insider.
Her sale was made while she possessed UPSI and before it became generally available. Publication on the stock exchange later makes the information generally available and ends its UPSI status, but it does not cure earlier dealing.
Whether she is penalised depends on whether she dealt on the basis of that UPSI. That is a matter of proof, and the regulations contain a presumption and defences, which you should address if asked.

Answer: Meera is an insider by possession, not a connected person. The unpublished results were UPSI until published. Her sale before publication, if based on that information, could be treated as insider trading attracting section 15G of the SEBI Act, 1992.

Exam tips

Write the definitions in full for 5 to 6 mark questions, then add one example. Examiners reward the three-limb UPSI test and the six-month look-back.
In case-study questions, always run two tests: the person (connected or in possession) and the information (UPSI or generally available).
Draw the contrast between insider and connected person in two lines. This is a favourite short note.
List the UPSI examples from memory: results, dividend, capital structure, merger, demerger, acquisition, delisting, disposal, expansion, change in key managerial personnel.
Cite section 12A and section 15G of the SEBI Act, 1992 for the prohibition and penalty. Do not cite section 195 of the Companies Act, 2013, which is omitted.

Practice questions from Prohibition of Insider Trading

Key Definitions: Insider, UPSI and Connected Person: frequently asked questions

What is the difference between an insider and a connected person?

A connected person is someone associated with the company in the six months before the act, in a way that gives access to UPSI. An insider is a connected person or anyone who possesses or has access to UPSI. So all connected persons are insiders, but not all insiders are connected persons.

What is UPSI under the SEBI PIT Regulations?

UPSI is information relating directly or indirectly to a company or its securities that is not generally available. It must be likely to materially affect the price of the securities once it becomes generally available. Results, dividends, mergers and changes in key managerial personnel are typical examples.

What is generally available information?

It is information that is accessible to the public on a non-discriminatory basis. Once information is generally available it is no longer UPSI. Telling a few people selectively does not make it generally available.

Who is a compliance officer under the PIT Regulations?

The compliance officer is a senior officer, usually a company secretary, who reports to the board. The officer oversees compliance with the code of conduct, including preclearance of trades, monitoring and reporting.

What is the penalty for insider trading under the SEBI Act, 1992?

Section 15G provides a penalty of not less than ₹10 lakh. It may extend to ₹25 crore or three times the profit made from insider trading, whichever is higher. It applies to dealing on UPSI, communicating UPSI other than in the ordinary course of business or under law, and counselling or procuring others to deal.