SEBI's Disclosure FAQs: Getting System Driven Disclosures and Thresholds Right

Source: SEBI's Comprehensive FAQs on SEBI (PIT) Regulations, 2015, dated December 31, 2024 — Section E, "Disclosures including System Driven Disclosures" (Q.17–Q.24).

Why this section matters

Disclosure obligations under Regulation 7 are where insider trading compliance meets the exchange's automated System Driven Disclosure (SDD-2, not to be confused with the Structured Digital Database) infrastructure. This section is dense with edge cases — who exactly is covered, what counts as a triggering transaction, how to value trades — because the automated system needs bright-line rules, and market participants kept surfacing scenarios the rules didn't obviously cover.

Q17 & Q18 — Who System Driven Disclosures actually cover, and where they break down

SEBI's September 2020 circular mandates system driven disclosures for promoters, directors, promoter group members, and designated persons under Regulation 7(2). But Q18 flags a real gap: if a designated person is a foreign national without a PAN or demat account, they cannot trade in Indian securities at all, so the system-driven disclosure mechanism simply never triggers for them. This isn't a loophole SEBI is leaving open — it's a logical consequence of the disclosure system being trade-triggered. If your company has foreign-national designated persons, don't assume the automated system is "catching" them; if they somehow do trade through an indirect route, your manual compliance processes need to be the backstop, not the automated SDD.

Q19 — Incremental disclosure only triggers at the next full threshold, not on every subsequent rupee

What SEBI clarifies: Once a designated person has crossed the ₹10 lakh quarterly disclosure threshold and disclosed, the next disclosure obligation arises only when transactions after that disclosure again cross ₹10 lakh — not on every subsequent trade regardless of size.

Practical takeaway: Your tracking mechanism needs to reset the counter at zero after each disclosure, accumulating fresh trades from that point, rather than treating the ₹10 lakh as a cumulative once-only trigger for the whole quarter. Get this wrong and you'll either over-disclose (noise) or under-disclose (a real compliance gap) depending on which way the tracking logic errs.

Q20 — Report at market rate, not net of costs

Trades should be reported at market rate, not net of brokerage, commission, or other transaction charges. This keeps disclosed values consistent and comparable across designated persons regardless of which broker or fee structure they use — a sensible standardization that your reporting template should hard-code rather than leave to individual interpretation.

What SEBI clarifies: Acquisitions/disposals beyond the threshold must be disclosed regardless of the mode of acquisition — including rights, mergers, etc. — except bonus issuance and shares received pursuant to a scheme (referencing an informal guidance letter on this point). This is a short list of exceptions; don't extend it by analogy to other corporate-action-driven acquisitions without checking the underlying informal guidance SEBI cites.

Q22 — Disclosure follows the designated person and their immediate relatives, as a package

Regulation 6(2) explicitly folds immediate relatives' trading into the designated person's own disclosure obligation. This is consistent with how PIT Regulations treat DPs and immediate relatives as a single compliance unit throughout the regulations (see also the Contra-trade and Designated Person sections) — your disclosure collection process for each DP needs to actively solicit immediate relative trading data, not just the DP's own trades.

Q23 — ESOP shares trigger disclosure on receipt, financing structure notwithstanding

Even where a designated person finances the acquisition of ESOP shares, disclosure is required on receipt of the shares pursuant to exercise. The financing arrangement is irrelevant to whether the disclosure trigger fires.

Q24 — Intra-self demat transfers don't trigger disclosure — unless the account isn't solely theirs

What SEBI clarifies: Transferring shares between two demat accounts of the same beneficial owner is not "trading" (beneficial ownership is unchanged) and doesn't trigger disclosure. But the 2023 addition is important: if either demat account has more than one owner (a joint account), disclosure requirements do apply.

What SEBI intends: The exemption exists because a same-person transfer has no economic substance as a "trade" — there's no change in beneficial interest to disclose. The joint-account carve-back closes an obvious way that logic could be misused: moving shares into a joint account changes the beneficial ownership structure (a second person now has an interest), so it can no longer ride on the "no change in ownership" rationale.

Practical takeaway: When a designated person requests an "internal" demat transfer, confirm both accounts are solely in their name before treating it as disclosure-exempt.

Bottom line for your compliance checklist

Don't rely on automated System Driven Disclosures as complete coverage for foreign-national DPs without PAN/demat accounts — build a manual backstop.
Reset your ₹10 lakh threshold tracker to zero after each disclosure; don't treat it as a single cumulative quarterly cap.
Standardize trade reporting at market rate, not net of transaction costs.
Keep the bonus-issue/scheme-shares exception narrow — check informal guidance before extending it to other corporate actions.
Actively collect immediate relatives' trading data as part of each DP's disclosure package.
Verify demat transfers are single-owner-to-single-owner (same person) before treating them as disclosure-exempt.

This article interprets SEBI's published FAQ for general informational purposes and reflects our reading of the source document as of the date of publication. It is not legal advice and should not be treated as a substitute for the actual text of the PIT Regulations, applicable circulars, or advice from a qualified professional. Readers should independently verify current requirements against SEBI's website before acting.