Mar 4, 2024

The Crucial Role of the Compliance Officer of Intermediaries and Fiduciaries including the maintenance of Restricted List

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Within the ecosystem of corporate operations, various external entities collaborate with the companies to facilitate the achievement of their ultimate goals. From Auditors scrutinizing the financial records to law firms providing invaluable counsel, each such entity contributes to the functioning and success of corporates. However, amidst these collaborations, regulatory compliance emerges as a cornerstone, especially concerning the handling of Unpublished Price Sensitive Information (“UPSI”) in accordance with the SEBI (Prohibition of Insider Trading) Regulations, 2015.

In the context of the SEBI (PIT) Regulations, 2015, these external entities can be categorized as Intermediaries, Fiduciaries, and Other Persons required to handle UPSI. (Intermediaries, Fiduciaries, and Other Persons are hereafter collectively referred to as “Entities”)

Understanding Intermediaries

SEBI-registered intermediaries, including Depository, Depository Participants, Brokers, Sub-brokers, Merchant Bankers, Portfolio Managers, Investment Advisors, Registrars and Share transfer agents, Clearing Corporations, etc. play vital roles in the securities market including but not limited to facilitating transactions, managing portfolios, providing investment advice and participating in various financial activities. Owing to their crucial role in the securities market these Intermediaries often gain access to UPSI of various listed companies, therefore, such Intermediaries are expected to uphold high standards of professionalism, integrity, and compliance with regulatory requirements.

Understanding Fiduciaries

A Fiduciary is someone who has a duty of loyalty and care towards another person or entity, and who must act in their best interest. In the context of a listed company, fiduciaries may include professional firms such as Auditors, Accountancy firms, Law firms, Analysts, Insolvency professional entities, Consultants, Banks, etc., assisting or advising listed companies.

Operating from a position of trust, these fiduciaries routinely gain access to various UPSI related to listed entities and their securities while rendering services to such entities.

Other persons

This includes all other entities that although operating outside the capital market are required to handle UPSI in the course of their business operations.

While navigating the UPSI of multiple listed companies in their business operations, Intermediaries, Fiduciaries, and Other persons must ensure that all their activities strictly adhere to the legal framework established by SEBI.

As per the SEBI (Prohibition of Insider Trading) Regulations, 2015, such entities are required to formulate a code of conduct to regulate, monitor, and report trading by their designated persons and their immediate relatives and identify and designate a Compliance Officer to administer the Code of Conduct and other requirements under these regulations.


The Code of Conduct to be observed by them differs from that of the listed entity and entails various distinct requirements, including the maintenance of restricted lists/grey lists, restriction on trading in restricted list securities, and the necessity for pre-clearance before any trading activity (subject to threshold limits as specified) (Refer: Informal Guidance in the matter of KP Capital Advisors Private Ltd.), among others.

Other compliances that are also to be adhered to by such Entities include-

  1. Specification of Designated person on basis of their role and function. [Regulation – 9(4)]
  2. Maintenance of Structure Digital Database [Regulation – 3(5)]
  3. Restricted Lists, Chinese wall, and Preclearance requirements.
  4. Reviewing compliance with regulations at least once in a year. [Regulation – 9A(4)]
  5. Have in place an adequate and effective system of internal controls. [Regulation – 9A(1) and (2)]

In a recent case, it came to light that partners of the statutory auditor of ABC Bearings Limited were involved in the communication of UPSI related to the merger between ABC Bearings Ltd and Timken India Ltd., based on which immediate relative of one of such partners carried out insider trading and was penalized by SEBI by Rs. 15 Lakhs. In such case, proper adherence to the SEBI (PIT) Regulations, 2015, coupled with the maintenance of a Restricted List by the Compliance Officer of the statutory auditor, could have prevented such non-compliance by the partners of the statutory auditor.

Restricted List

A question that arises from the above paragraph is what exactly constitutes a Restricted list and how it could be used to prevent such non-compliance.

A “Restricted List” in the context of SEBI (Prohibition of Insider Trading) Regulations, 2015, refers to a curated list of securities, sometimes also known as a ‘Grey List’, which is to be used by the Compliance officer for approving or rejecting applications for pre-clearance of trades.

In the regular operations of business, Entities provide services to numerous listed entities. This involves personnel from these entities frequently accessing a multitude of UPSI of various Listed Companies. To prevent the improper use of such information for unlawful advantage and to maintain the integrity of the securities market, the Compliance Officer of these entities must maintain a Restricted List confidentially.

This list then shall be utilized by the Compliance Officer to approve or deny pre-clearance requests by designated persons.

As evident from the foregoing, the compliance officers of these entities bear the utmost responsibility to prevent the misuse of such price-sensitive information for any illicit gains, as well as ensure strict adherence to the regulations. This brings us to the following:

Role and Responsibilities of Compliance Officer

The role of a Compliance Officer is pivotal within an organization, particularly concerning adherence to legal and regulatory requirements. A compliance officer, as defined under the SEBI (Prohibition of Insider Trading) Regulations, 2015, is a senior officer designated to report to the Board of directors or the head of the organization. His responsibilities encompass ensuring compliance with policies and procedures, maintaining records, monitoring adherence to rules regarding the preservation of unpublished price-sensitive information, overseeing trades, and implementing specified codes.

The Role and Responsibilities of Compliance Officer also include:

  1. Policing, monitoring, and regulating trading activities by designated persons and their immediate relatives.
  2. Consultation with the Board of Directors and organizational heads to specify designated persons.
  3. Maintenance of a Restricted List.
  4. Approval or rejection of pre-clearance requests for trades.
  5. Approval or rejection of Trading plans.
  6. Providing reports to the chairman of the board of directors, the organization’s head, or the chairman of the Audit Committee.

Overall, the compliance officer plays a crucial role in upholding legal and regulatory standards, safeguarding against Insider Trading, and maintaining the integrity of the securities market.

To maintain a comprehensive Restricted List, along with ensuring compliance with other provisions such as maintenance of Structured Digital Database of SEBI (PIT) regulations, Corporate Professionals has developed SDD Software-INSILYSIS which has all the features to meet the various compliance requirements under SEBI.

With its user-friendly interface and robust functionality, INSILYSIS streamlines compliance processes, making it the ultimate choice for organizations in navigating Insider Trading regulations. Elevate your compliance environment with INSILYSIS – the leading Compliance Software in the market.


Ms. Mohini Varshenya

Partner & Head-ESOP Services


+91 9971673332

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