Hey there! If you’re navigating the complex world of securities trading in India, understanding who counts as an “immediate relative” under SEBI regulations is super important. I’ve been researching this topic extensively and wanted to share what I’ve learned to help you stay compliant.
The Official Definition of Immediate Relatives
According to SEBI (Prohibition of Insider Trading) Regulations. 2015 (PIT Regulations) an “immediate relative” means
A spouse of a person, and includes parent, sibling, and child of such person or of the spouse, any of whom is either dependent financially on such person or consults such person in taking decisions relating to trading in securities.
Let me break this down in simpler terms:
- Your spouse (husband/wife)
- Your parents
- Your siblings (brothers/sisters)
- Your children
- Your spouse’s parents
- Your spouse’s siblings
- Your spouse’s children
But there’s an important qualification – these relatives must either:
- Be financially dependent on you, OR
- Consult you when making decisions about trading securities
Key Things You Should Know About Immediate Relatives
Reporting Requirements
As a designated person in a listed company, you’re required to disclose details about your immediate relatives. Here’s what you need to know:
- Even if they don’t hold shares: You must update their PAN details irrespective of whether they hold any shares in your company
- Frequency of updates: You need to update these details promptly whenever there are any changes
- Joint holders beware: If an immediate relative is a joint holder of a demat account, restrictions apply to that entire account during trading window closures
PAN Requirements
The system relies heavily on PAN (Permanent Account Number) identification
- You must include PANs of promoters, promoter groups, designated persons, and their immediate relatives
- If someone is PAN exempted, you need to upload their Demat account number
- If neither is present, these details must be managed offline
Important Dates for Compliance
Pay attention to these timeline requirements
- For top 500 companies: Freezing of PANs of immediate relatives becomes applicable from July 1, 2025
- For all other companies: This freezing will be applicable from October 1, 2025
How This Impacts Trading Windows
When a trading window closure (TWC) period is in effect, the following restrictions apply:
On Stock Exchange Platforms
The exchanges use the PAN data to identify trading accounts (UCCs) associated with designated persons and their immediate relatives. During the TWC period, these accounts are restricted from trading in the securities of the concerned listed company.
In Depository Systems
Similar to exchanges, depositories identify demat accounts based on PANs and impose restrictions on transactions in the securities of the concerned company. This can create complications with joint accounts:
- Demat accounts can have up to three joint holders
- If your immediate relative is a joint holder, restrictions apply to that entire demat account
- Trading accounts cannot be held jointly
- If a joint holder (who isn’t a designated person or immediate relative) tries to trade during a window closure, exchange systems might not restrict the trade, but depositories will block the transaction
- This mismatch can lead to settlement issues or auction losses
Frequently Asked Questions
Can immediate relatives be non-individuals?
No. Immediate relatives can only be individuals. Companies, LLPs, or other entities cannot be classified as immediate relatives.
What if my immediate relative doesn’t have a PAN or Demat account?
If they don’t have a PAN, but they’re PAN exempted, you should provide their Demat account number. If they have neither, their details need to be managed through offline mode by the issuer.
What’s the difference between exemption and removal of a PAN?
- Exemption: Can be provided based on regulatory reasons
- Removal: For those PANs for whom Unpublished Price Sensitive Information (UPSI) is not applicable
Should I include immediate relatives of personnel from auditors, RTA, and other related entities?
You should include individuals who possess Unpublished Price Sensitive Information (UPSI).
Can I transfer/migrate a PAN from another category to the immediate relative category?
Yes, the PAN can be added by deleting/modifying it to the immediate relative category.
Why This Matters So Much
I’ve seen many traders and corporate insiders get into trouble because they didn’t understand these regulations properly. The whole point of these rules is to prevent insider trading – using non-public information to gain an unfair advantage in the markets.
When your immediate relatives trade in your company’s securities, regulators assume they might have access to inside information through you. This is why their trading activities are monitored and restricted during sensitive periods.
How Companies Track Compliance
Companies use System Driven Disclosure (SDD) to keep track of all these requirements. They maintain databases of:
- Promoters and promoter group members
- Designated persons within the organization
- Immediate relatives of designated persons
- Trading and demat accounts of all the above
During trading window closures, this information is shared with exchanges and depositories to automatically enforce trading restrictions.
Need Help With Compliance?
If you’re finding all this confusing (and tbh, it can be!), there are resources available. Both exchanges and depositories provide support:
Depositories:
- NSDL: Contact their SDD Support Team at 022-42165750 or email at [email protected]
- CDSL: Reach them at 022 6234 3609/3610 or email [email protected]
Exchanges:
- NSE: Call their toll-free number 1800 266 0050 or email [email protected]
- BSE: Contact them at +91 22 69158560 or email [email protected]
- MSE: Reach them at +91 22 61129000 or email [email protected]
Final Thoughts
Understanding who qualifies as an immediate relative under SEBI guidelines isn’t just a technicality – it’s essential for proper compliance. The regulations are designed to maintain market integrity by preventing insider trading.
As someone who’s navigated these waters, my advice is to err on the side of caution. When in doubt, include someone as an immediate relative rather than risking non-compliance. The penalties for insider trading violations can be severe, and ignorance of the rules isn’t considered a valid excuse.
Have you had any challenges dealing with immediate relative disclosures? I’d love to hear your experiences in the comments below!
Stay compliant and happy trading!
