Unit study guide · NISM Series III-A
SEBI (Prohibition of Insider Trading) Regulations, 2015
9 questions in this unit
What this unit covers
- Can a person outside a listed company be an insider under the insider-trading regulations?
- Which information most clearly fits unpublished price-sensitive information before public disclosure?
- An adviser needs confidential merger information for genuine due diligence. Which approach is appropriate before sharing unpublished price-sensitive information?
- Research staff do not need confidential deal information. Which internal arrangement best restricts its flow from the deal team?
- How must the structured digital database required for unpublished price-sensitive information generally be maintained?
- What is the minimum ordinary retention period for the structured digital database after completion of the relevant transactions?
- A designated person possesses unpublished price-sensitive information while the trading window is open. No exception applies. May the person trade?
- A person knowingly trades while possessing unpublished price-sensitive information and ultimately loses money. No statutory defence or exception applies. What follows?
- The ordinary retention period for an unpublished price-sensitive information database has expired. SEBI has notified an ongoing investigation involving it. What should happen?
Key ideas
From the practice bank · 1
Can a person outside a listed company be an insider under the insider-trading regulations?
An outsider can be an insider through possession of or access to unpublished price-sensitive information. Remember: Insider status can arise from information access, not merely employment.
Hint Common mistake: Assuming an external adviser is automatically outside insider-trading law. Consider the information-based route in the definition.
III-A-055From the practice bank · 2
Which information most clearly fits unpublished price-sensitive information before public disclosure?
A confidential materially significant merger decision can be unpublished price-sensitive information because it is not public and can affect price. Remember: UPSI combines non-public information with material price significance.
Hint Common mistake: Treating every piece of financial information as UPSI. Check both public availability and likely material price impact.
III-A-056From the practice bank · 3
An adviser needs confidential merger information for genuine due diligence. Which approach is appropriate before sharing unpublished price-sensitive information?
Necessary sharing for a legitimate purpose must follow the applicable confidentiality and information-control safeguards. Remember: A legitimate purpose permits controlled use, not unrestricted dissemination or trading.
Hint Common mistake: Assuming legitimate access makes every subsequent use lawful. A lawful purpose for sharing does not remove the need for controls.
III-A-057From the practice bank · 4
Research staff do not need confidential deal information. Which internal arrangement best restricts its flow from the deal team?
An information barrier restricts unnecessary access and communication between teams handling different responsibilities. Remember: Information barriers require practical access and communication controls.
Hint Common mistake: Treating a policy statement alone as an effective information barrier. Think about separating access in practice, not merely asking people to be careful.
III-A-058From the practice bank · 5
How must the structured digital database required for unpublished price-sensitive information generally be maintained?
The required database must be maintained internally and must preserve integrity through measures such as timestamps and audit trails. Remember: The UPSI database must be reliable, traceable and internally maintained.
Hint Common mistake: Confusing a casually maintained contact list with the statutory database. Recall the specific record’s responsibility and integrity requirements.
III-A-059From the practice bank · 6
What is the minimum ordinary retention period for the structured digital database after completion of the relevant transactions?
The ordinary minimum is eight years after completion of the relevant transactions, with longer preservation when an investigation requires it. Remember: Different regulatory records can have different retention periods and starting points.
Hint Common mistake: Using a general retention policy without checking the specific UPSI requirement. Recall the retention rule specific to the UPSI database, not general client records.
III-A-060From the practice bank · 7
A designated person possesses unpublished price-sensitive information while the trading window is open. No exception applies. May the person trade?
The person must not trade because an open window does not override the UPSI possession restriction. Remember: Trading-window permission is not a defence to trading while possessing UPSI.
Hint Common mistake: Treating an open window as complete legal clearance. Distinguish an internal trading window from the substantive legal prohibition.
III-A-061From the practice bank · 8
A person knowingly trades while possessing unpublished price-sensitive information and ultimately loses money. No statutory defence or exception applies. What follows?
A loss alone does not defeat the prohibition because the rule is not limited to profitable trades. Remember: Assess the information and circumstances when trading, not only the eventual profit.
Hint Common mistake: Assuming an unsuccessful trade cannot constitute insider trading. Ask whether the prohibition depends on the eventual investment result.
III-A-062From the practice bank · 9
The ordinary retention period for an unpublished price-sensitive information database has expired. SEBI has notified an ongoing investigation involving it. What should happen?
The relevant database information must be preserved until completion of the notified investigation. Remember: An investigation hold can extend ordinary record retention.
Hint Common mistake: Running automatic deletion without checking legal holds. Look for the preservation requirement triggered by an investigation notice.
III-A-063