Designated Persons and Trading Window

If Regulation 4 is the substantive prohibition that catches the guilty insider after the fact, the trading window is the prophylactic device that tries to stop temptation before it ripens. It does not ask whether a particular person actually possessed unpublished price sensitive information (UPSI); it draws a bright administrative line around a class of people the issuer itself has designated as risky, and shuts them out of the market during sensitive periods. This chapter examines who a "designated person" is, how the notional trading window is built through the Code of Conduct under Regulation 9 and Schedule B, when it closes, how pre-clearance and the contra-trade ban operate, and how SEBI's 2023–2025 "PAN freeze" circulars have converted what was once a paper undertaking into automated, exchange-enforced reality.

The trading window: concept and purpose

The trading window is not a statutory prohibition in the body of the Regulations at all. It is a self-regulatory mechanism that every listed company and intermediary must build into its own Code of Conduct under Regulation 9, adopting the minimum standards prescribed in Schedule B (for listed companies) and Schedule C (for intermediaries and fiduciaries). Clause 4 of Schedule B is explicit: "A notional trading window shall be used as an instrument of monitoring trading by the designated persons." The window is "notional" because there is no physical gate; it is a period during which designated persons are forbidden by their own company's code from dealing in its securities.

The logic is prophylactic. Catching an insider after she has traded requires SEBI to assemble a chain of proof about possession of UPSI and trading "on the basis of" it — the difficult evidentiary terrain mapped in our chapter on Regulation 4. The trading window short-circuits that inquiry for the highest-risk population. During a closure, a designated person may not trade at all in the company's securities, whether or not she actually holds price-sensitive information, because the very class to which she belongs "can reasonably be expected to have possession of unpublished price sensitive information" (Clause 4). It is a structural, status-based restriction layered on top of the conduct-based prohibition in Regulation 4.

This distinction matters for examinations. A trade during a closed window is a breach of the Code of Conduct — actionable by the company internally and by SEBI as a violation of Regulation 9 read with Schedule B — even if it would not amount to insider trading under Regulation 3 or 4 because the person held no UPSI. The two regimes overlap but are not coextensive.

Who is a "designated person"?

The expression "designated person" was not defined in the 2015 Regulations as originally notified. Following the recommendations of the Committee on Fair Market Conduct (the Kotak Committee), the SEBI (Prohibition of Insider Trading) (Amendment) Regulations, 2018, effective 1 April 2019, inserted Regulation 9(4), which obliges the board of directors (in consultation with the compliance officer) to specify the designated persons to be covered by the Code on the basis of their role and function and the access that such role and function would provide to UPSI.

Regulation 9(4) prescribes a non-exhaustive floor. The designated-persons list must at minimum include: (a) employees designated by the board on the basis of their role and function or their access to UPSI; (b) employees of material subsidiaries designated on the same basis; (c) all promoters of listed companies and promoters who are individuals or investment companies for intermediaries or fiduciaries; (d) the Chief Executive Officer and employees up to two levels below the CEO, irrespective of their functional role or access to UPSI; and (e) any support staff such as IT staff or secretarial staff who have access to UPSI. The category in clause (d) is deliberately status-based — the top two management tiers are swept in regardless of whether they touch sensitive information — reflecting the prophylactic philosophy of the whole chapter.

Designation triggers a cascade of obligations beyond the trading window: the initial and continual disclosure duties under Regulations 6 and 7, the maintenance of a structured digital database under Regulation 3(5), and the obligation to report the names and PANs of designated persons and their immediate relatives. The status is thus the hinge on which much of the compliance architecture turns, which is why getting the list right is a recurring subject of SEBI's inspection findings.

Regulation 9 and the duty to frame a Code of Conduct

Regulation 9(1) requires the board of directors of every listed company, and the board or head of every market intermediary, to ensure that the CEO or managing director formulates a code of conduct — with the board's approval — to regulate, monitor and report trading by designated persons and their immediate relatives, adopting the minimum standards in Schedule B. Regulation 9(2) extends a parallel obligation to other "fiduciaries" and intermediaries handling UPSI, who must adopt the minimum standards in Schedule C. Regulation 9(3) requires every such entity to identify and designate a compliance officer to administer the code and monitor compliance.

Regulation 9A, also inserted on the Kotak Committee's recommendation, adds a layer of institutional responsibility: the CEO and board must put in place adequate internal controls — identification of UPSI, restriction of its communication on a need-to-know basis, periodic confirmation of compliance, and a whistle-blower policy — and the audit committee must review compliance at least annually. Schedule B clause 1 also requires that the compliance officer maintain confidentiality and that the code provide for sanctions for breach, including disgorgement of profits, which may be remitted to SEBI for credit to the Investor Protection and Education Fund.

The architecture is therefore a delegation: SEBI sets the minimum standards, but enforcement of the day-to-day mechanics is pushed onto the issuer's own officers. This is why the compliance officer occupies such a pivotal position in everything that follows — the closure of the window, the grant of pre-clearance, and the policing of contra-trades all run through that office. The downstream prohibition on tipping is treated separately in our chapter on communication and procurement of UPSI.

When the window closes

Clause 4 of Schedule B vests the compliance officer with discretion to close the window whenever a designated person or class of designated persons "can reasonably be expected to have possession of unpublished price sensitive information." In practice the window closes around any sensitive corporate development — a merger or acquisition, a major contract, a capital-raise or a dividend decision — from the time the information is generated until it becomes generally available.

The most universal and mechanical instance is the closure around financial results. Following the 2019 amendment to Clause 4, the trading window for the declaration of financial results closes from the end of every relevant quarter and reopens only 48 hours after the results are made public. Because every listed company declares quarterly results, designated persons are effectively locked out for a substantial part of each year, and the timing of the closure is not left to the compliance officer's judgment — it is hard-wired to the financial calendar.

Clause 4 also carves out transactions to which the closure does not apply. As amended in 2019, window restrictions do not apply to certain transactions undertaken in accordance with SEBI regulations — acquisition by conversion of warrants or debentures, subscribing to a rights or further public issue, tendering shares in a buy-back, open offer or delisting offer, and the like — nor to the exercise of stock options where the exercise price is pre-determined, nor to transactions carried out through an approved trading plan under Regulation 5. These carve-outs recognise that such transactions are either non-discretionary as to timing or already governed by their own disclosure regime, so the prophylactic rationale of the window does not bite.

Pre-clearance of trades

When the window is open, designated persons are still not free to trade at will above a threshold. Clause 6 of Schedule B requires that trading by designated persons be subject to pre-clearance by the compliance officer if the value of the proposed trades exceeds such thresholds as the board stipulates. The pre-clearance mechanism is a second filter: it allows the compliance officer to verify, transaction by transaction, that the person is not in possession of UPSI at the moment of the proposed dealing.

Clause 8 permits the compliance officer to require the applicant to submit a declaration, in such form as may be specified, to the effect that the applicant is not in possession of any UPSI and has no reason to believe possession of UPSI at the time of signing the declaration. Crucially, if the applicant has traded contrary to such a declaration, or if any UPSI in fact came into her possession after pre-clearance, the trade may be invalidated and treated as a breach. The declaration is therefore not a mere formality; it is the evidentiary hook that converts an apparently innocent trade into a documented contravention.

Clause 9 fixes the shelf-life of a pre-clearance. The pre-cleared trade must be executed within seven trading days of approval; if it is not, fresh pre-clearance must be obtained. This prevents a designated person from banking a clearance during a quiet period and then executing it days later once she has, in the interim, become privy to UPSI. The seven-day rule and the contra-trade bar examined next are the two numerical anchors most frequently tested in objective papers.

The contra-trade restriction

Clause 10 of Schedule B prohibits designated persons who buy or sell securities from entering into an opposite transaction — a contra-trade — during the next six months following the prior transaction. Thus a designated person who buys shares may not sell them for six months, and vice versa. The object is to remove the incentive to engage in short-term, information-driven round-trips and to discourage the kind of quick reversal that often betrays trading on transient information.

The compliance officer may, for reasons recorded in writing, grant relaxation from the contra-trade restriction in respect of trades that are not in conflict with the regulations — for instance, where the original purchase was itself made under a trading plan, or in cases of genuine hardship. However, the relaxation power is bounded: it does not extend to permitting a contra-trade during a period when the trading window is closed, and SEBI has consistently treated the bar as substantive rather than merely procedural. Where a designated person executes a prohibited contra-trade, the profits made are liable to be disgorged and remitted to SEBI for credit to the Investor Protection and Education Fund.

The historical lineage of the contra-trade and 24-hour bars can be traced to the 1992 Code. In the adjudication concerning Manmohan Shetty in the matter of Adlabs Films Ltd., the noticee sold shares before the expiry of the cooling period following a board meeting, in breach of the model code under the SEBI (Prohibition of Insider Trading) Regulations, 1992. The case illustrates that the code-of-conduct breach is independent of any finding that the person actually traded on UPSI — a theme carried forward into the trading-window architecture of the 2015 Regulations and explained in our chapter on the evolution from the 1992 Regulations.

Code-of-conduct breach versus insider trading: two distinct charges

A central conceptual point, and a favourite of essay questions, is that a violation of the trading window or contra-trade rules is a breach of the Code of Conduct under Regulation 9 and Schedule B, which is conceptually distinct from the substantive offence of insider trading under Regulations 3 and 4. A designated person who trades during a closed window commits a code breach regardless of whether she possessed UPSI; conversely, a person may be liable for insider trading under Regulation 4 even though no window closure or code applied to her.

This distinction surfaced sharply in Securities and Exchange Board of India v. Abhijit Rajan, 2022 SCC OnLine SC 1241 (decided 19 September 2022). Rajan, the Chairman and Managing Director of Gammon Infrastructure Projects Ltd. (GIPL), had sold GIPL shares while in possession of UPSI concerning the termination of certain shareholders' agreements. The Supreme Court, dismissing SEBI's appeal against the SAT, held that although actual gain or loss is immaterial, the motive to make a gain is essential to an insider-trading charge; on the facts, Rajan's sale was driven by the compelling necessity of funding a corporate debt restructuring of the parent company, not by an intent to profit from the UPSI, and the information he held was in fact price-negative while he was selling. The case is a substantive Regulation 4 ruling rather than a trading-window case, but it reinforces the lesson that the window and contra-trade rules deliberately avoid such fact-intensive inquiries by imposing flat, status-based bars that do not turn on motive at all.

The contrasting older authority of Rakesh Agrawal v. SEBI (SAT, 2004), arising under the 1992 Regulations, where the Tribunal accepted that a managing director who dealt in the interest of completing a strategic acquisition lacked the requisite intent, similarly shows why SEBI has progressively shifted weight onto the mechanical trading-window regime: bright-line prophylaxis is easier to administer than a contested inquiry into motive.

Trading pattern as evidence and defence

Even within the substantive Regulation 4 inquiry, the contra-trade logic informs how SEBI and the tribunals read trading behaviour. In Mrs. Chandrakala v. SEBI, the Securities Appellate Tribunal observed that a person privy to positive UPSI would rationally be expected to buy before publication, not sell; where the noticee's trading pattern ran contrary to what the alleged UPSI would have motivated, the Tribunal accepted that she had not traded "on the basis of" the information and could not be held liable under Regulation 3.

The principle is double-edged. It shows that the deeming presumption — that an insider who trades while in possession of UPSI is presumed to have traded on its basis — is rebuttable by evidence of an innocent or contrary trading pattern, a point developed in our chapter on trading when in possession of UPSI. But it equally explains why the trading window exists: rather than litigate the direction and motive of every trade, the prophylactic regime simply forbids designated persons from dealing during sensitive windows, removing the occasion for such disputes.

Immediate relatives and material financial relationship

The reach of the Code extends beyond the designated person to her immediate relatives and to persons with whom she shares a material financial relationship. Regulation 9(1) expressly directs that the code regulate, monitor and report trading by designated persons "and their immediate relatives." An "immediate relative" is defined in Regulation 2(1)(f) as a spouse, and a parent, sibling and child of the person or of the spouse, any of whom is either dependent financially on the person or consults the person in taking decisions relating to trading in securities.

The 2018 amendments also introduced the concept of a "material financial relationship" — a relationship in which one person is a recipient of any kind of payment such as a gift or loan from a designated person during the preceding twelve months, equivalent to at least 25% of the annual income of such designated person (excluding arm's-length transactions). Designated persons must disclose names and PANs of such persons, allowing the issuer to monitor potential conduits for indirect dealing. The net is cast widely precisely because the most obvious evasion of a window closure is to trade through a relative or a financially dependent associate.

From paper undertakings to automated PAN freeze

Historically the trading window was enforced only on paper: the company circulated a notice, designated persons signed undertakings, and breaches surfaced, if at all, only on later scrutiny. SEBI has since moved to automated enforcement. By its circular dated 2 August 2022, and then by the circular dated 19 July 2023 (SEBI/HO/ISD/ISD-PoD-2/P/CIR/2023/124) titled "Trading Window closure period under Clause 4 of Schedule B read with Regulation 9 of PIT Regulations — Extending framework for restricting trading by Designated Persons by freezing PAN at security level," SEBI extended the framework to all listed companies in a phased manner, sequenced by market capitalisation.

Under this framework, during the closure period around financial results the depositories and stock exchanges freeze the PAN of each designated person at the security level, so that the trading system itself blocks any attempt to deal in that company's scrip. The company submits the list of designated persons and their PANs; the exchanges and depositories operationalise the freeze and lift it when the window reopens 48 hours after results. Enforcement thus shifts from after-the-fact adjudication to real-time, system-level prevention.

By its circular dated 21 April 2025 (SEBI/HO/ISD/ISD-PoD-2/P/CIR/2025/55), SEBI extended the automated trading-window-closure mechanism to the immediate relatives of designated persons in respect of the financial-results closure, plugging the most obvious gap — trading routed through a spouse or dependent. The trajectory of these circulars is the most examinable "recent development" in this chapter: the trading window has evolved from a voluntary code provision into a machine-enforced, market-wide prohibition.

Reporting, monitoring and the disclosure interface

The trading window does not operate in isolation; it is stitched into the disclosure machinery of Chapter III of the Regulations. Designated persons making any trade above the prescribed threshold must report it to the company, and the company must in turn notify the stock exchanges under the continual-disclosure regime in Regulation 7(2). Schedule B requires the compliance officer to maintain records of pre-clearance applications, declarations and the trading-window calendar, and to place periodic reports of compliance before the audit committee under Regulation 9A.

The interface with the structured digital database under Regulation 3(5) is also significant: the names of designated persons and the UPSI to which they had access must be captured with time stamps and audit trails, so that if a designated person trades during a closure the database supplies contemporaneous evidence of access. Together these obligations are explained in detail in our chapter on initial and continual disclosures, and they are best studied alongside the present chapter because a trading-window breach is almost always discovered through the disclosure and database trail rather than through the trade itself.

Exam themes and common pitfalls

Several traps recur in examinations on this chapter. First, candidates conflate the code-of-conduct breach (trading window, contra-trade, pre-clearance) with the substantive offence of insider trading under Regulation 4; remember that a window breach does not require proof of UPSI possession, whereas a Regulation 4 charge does. Second, the seven-trading-day validity of a pre-clearance under Clause 9 is frequently misremembered as seven calendar days — it is seven trading days. Third, the contra-trade period is six months from the prior transaction, and the compliance officer's relaxation power cannot authorise a contra-trade while the window is closed.

Fourth, the financial-results window closes from the end of the relevant quarter and reopens 48 hours after the results are made public — not at the moment of declaration. Fifth, the designated-persons categories in Regulation 9(4) include the CEO and employees up to two levels below, irrespective of access to UPSI, which is the clearest illustration that designation is status-based rather than information-based. Finally, the recent automation of the window through the PAN-freeze circulars of 2022, 2023 and 2025 is the most likely "latest development" question and should be cited with at least approximate dates. For the conceptual foundations underlying all of this, revisit the SEBI PIT Regulations hub and the chapter on the definitions of insider, connected person and UPSI.