If you are an investor or trader in India, there are certain legal disclosures you must provide under SEBI regulations, exchange rules, and tax laws. These requirements help ensure fair and transparent markets.
Below are the main disclosures you may need to make, depending on your activity and the type of investment:
PAN and KYC Disclosure
1. You must provide your Permanent Account Number (PAN) when opening any trading or demat account.
2. Full Know Your Customer (KYC) details are required, including proof of identity, address, and income.
3. If you change your address, contact details, or bank account, you must update these records with your broker and depository participant.
Disclosure of Large Shareholding
If you acquire shares of a listed company and your holding (together with persons acting in concert) reaches 5% or more, you must disclose this to:
- The company
- The relevant stock exchanges
If your shareholding later increases or decreases by 2% or more, you must make another disclosure.
These disclosures must be made within 2 working days of the transaction.
This is as per SEBI (Substantial Acquisition of Shares and Takeovers) Regulations, 2011.
Insider Trading Disclosures
If you are a promoter, director, designated employee, or connected person in a listed company:
You must disclose your holdings to the company within 30 days of becoming an insider or upon appointment, and within 7 days for new securities acquired.
Continual disclosures are needed when:
Your trades (buy or sell) exceed ₹10 lakh in market value in a calendar quarter, reported within 2 trading days of the transaction.
Designated persons and their immediate relatives must follow the company’s trading window and pre-clearance requirements for trades above the company’s specified threshold.
This is as per SEBI (Prohibition of Insider Trading) Regulations, 2015.
Tax Reporting
All capital gains from shares and mutual funds, dividends, and income from trading or investing must be reported in your Income Tax Return.
You may also need to declare foreign assets and holdings if applicable.
Derivatives trading income (e.g., futures and options) is treated as business income under Section 43(5) of the Income Tax Act, unless it’s a hedging transaction. Frequent traders may also have their trading income classified as business income, depending on frequency and volume.
Pledge and Encumbrance Disclosure
If you have pledged your shares as collateral:
Promoters must disclose any pledge or encumbrance on their shares, including creation, release, or invocation, within 7 working days to the company and stock exchanges.
Non-promoter shareholders are generally not required to disclose pledges unless they hold significant shares (e.g., above 5%) under SAST Regulations.
Regulatory Filings for Certain Investors
If you are an NRI, FPI, or large institutional investor, there are additional disclosures:
Disclosure of beneficial ownership, especially for FPIs holding over 10% in a listed company or from specific jurisdictions.
FPIs must submit quarterly shareholding reports to custodians and SEBI, complying with SEBI (FPI) Regulations, 2019, and PMLA Rules, 2005.
NRIs must comply with FEMA and RBI’s Foreign Exchange Management (Non-debt Instruments) Rules, 2019, for investments.