Strengthening Insider Trading Regulations: Freezing PAN at Security Level for All Listed Companies

Read Time: 15 minutes


On July 19, this year, the Securities and Exchange Board of India (SEBI) issued a circular i.e., SEBI/HO/ISD/ISD-PoD-2/P/CIR/2023/124, introducing an extended framework for restricting trading by Designated Persons (DP’s hereinafter) in listed companies. The promoters, directors, key managerial staff, auditors, support staff of the accounts, finance, legal, internal audit, secretarial departments, secretaries/executive assistants reporting to the directors, the key managerial staff, all departmental heads of the company, employees up to two levels below the directors are among the designated person(s). 

With this step, the Indian securities market's insider trading practices will be curbed and the current regulatory procedures would be strengthened. The circular describes the gradual adoption of PAN (Permanent Account Number, hereinafter) freezing at the security level, which will essentially close the trading window, in a phased manner. 

Understanding the Concept of Freezing PAN at the Security Level

Designated Persons refers to people who, as a result of their position or affiliation with a listed company, have access to confidential or price-sensitive information and are involved in the trading process. When the trading window is open, DP’s may trade (buy/sell) in the Company's equity shares. A trading window's main goals are to stop insider trading and guarantee fairness in the financial markets. When there is a substantial risk of insider trading, such as just before the release of financial results or any other significant event, the trading window is closed. The closed trading window period is designed to stop insiders from profiting from their insider knowledge in the financial markets.

A technique used to impose trading limits on DPs during the trading window closing period is the freezing of PAN at the security level. The PAN, a special identifying number given out by the Income Tax Department, is connected to particular securities that the DPs own. Because trading in certain securities within the closed trading window could result in the misuse of private information, this linkage assures that DPs cannot do so.

The PAN is frozen at the security level using designated depositories that the listed company has appointed. The listed company, stock exchanges, and designated depositories collaborate closely to identify DPs, their demat accounts, and the pertinent securities. Following that, trading in those securities is restricted during the trading window closure period using this information. The listed company, stock exchanges, and designated depositories collaborate closely to identify DPs, their demat accounts, and the pertinent securities. Following that, trading in those securities is restricted during the trading window closure period using this information.

Overall, freezing of PAN at the security level strengthens the monitoring and regulatory system in the Indian securities market and protects investors' interests. By prohibiting insider trading, the market's fairness and transparency are strengthened, fostering trust among investors and other market participants. 

Key Provisions of the Circular

A significant regulatory measure is introduced by the SEBI circular to stop insider trading in publicly traded companies. It emphasises the significance of adhering to Schedule B Clause 4 read in conjunction with Regulation 9 of the SEBI (Prohibition of Insider Trading) Regulations, 2015, which requires the use of a notional trading window for DP’s to monitor trading. It highlights the significance of a notional trading window as a tool for DP’s trading oversight and stresses that DPs and their close family members must not trade when the trading window is closed.

The freezing PAN framework was previously limited to listed companies that were included in benchmark indices, but it is now more broadly applicable. In order to gradually bring all listed companies under the framework, the circular specifies a staged strategy to bring all listed firms within the freeze PAN framework in order to ensure smooth implementation. Following is the timeline:

  • Listed companies that are included in benchmark indices are already covered by the first phase. The freezing PAN framework has applied to these businesses ever since it was first put into effect, preventing DPs and members of their close family from trading during the closed trading window.
  • The framework will be extended to the top 1,000 corporations in the second phase, starting on October 1, 2023, based on their BSE market capitalization as of June 30, 2023. With this action, the regulatory measure's reach is further expanded to include a sizeable portion of the listed companies.
  • The freezing PAN framework will be extended to the next 1,000 corporations starting on January 1, 2024, based on their BSE market capitalization as of June 30, 2023. This additional development guarantees even greater regulatory framework coverage for listed companies.
  • Beginning on April 1, 2024, the fourth phase will wrap up implementation by bringing all remaining listed companies on the BSE, NSE, and MSEI under the umbrella of the framework for freezing PANs. Due to this extensive inclusion, the regulatory measure is guaranteed to apply to almost all listed firms.
  • The circular also covers businesses that list after it is issued. The freezing PAN framework will be in effect for these recently listed companies as of the first day of the second quarter after their listing quarter. This clause makes sure that all businesses, including those that enter the market later, abide by the rules.

The phased implementation of the freezing PAN framework enables a systematic rollout while taking into account the various categories of listed companies and their market capitalization. This carefully thought-out implementation strategy makes it possible for the regulatory measure to be implemented smoothly, effectively reducing insider trading and fostering market integrity in the Indian securities market.

The circular also provides a thorough procedure for putting the frozen PAN framework into practice. The designated depository (DD hereinafter) is responsible for granting access to the listed company on the portal or platform, validating the information of DPs, defining the trading window closure times, and disseminating pertinent information to stock exchanges and other depositories. The DD ensures that the information for DPs is correctly filled out and grants access to the listed company on the portal or platform. Following the listed company's specification of the trading window closure times on the portal or platform, the DD notifies the stock exchanges and other depositories of this information.

Further the Depositories must provide SEBI with information on the progress of the freezing PAN framework implementation in quarterly reports. These reports are used to track and assess how well the regulatory measure is working.

Impact and Implications

The SEBI circular is an important step in the direction of improving accountability and transparency in the securities industry. SEBI wants to prevent DPs from violating insider trading laws, so it has expanded the PAN framework for freezing to include all publicly traded companies. 

A systematic and reasonable approach is ensured by the phased implementation, which enables market participants to progressively adapt.

The PAN framework will be strengthened by freezing, which will make it simpler to spot and address any insider trading incidents. Additionally, by reducing the likelihood of unfair tactics and creating a level playing field for all investors, this endeavor can increase investor trust.


In terms of securities market regulation in India, the SEBI circular on expanding the framework for DP trading restrictions through the freezing PAN mechanism is a step in the right direction. SEBI seeks to improve market integrity and protect investor interests by adhering to global best practices. It will be vital for all parties involved to abide by the circular's requirements and endeavor to establish a transparent and equitable trading environment, including listed businesses, stock exchanges, and depositories.