1. Background

The Structured Digital Database (SDD) was introduced under Regulations 3(5) and 3(6) of the SEBI (Prohibition of Insider Trading) Regulations, 2015 to strengthen insider trading controls and ensure accountability for all flows of Unpublished Price Sensitive Information (UPSI).

For entities such as SEBI-registered Portfolio Managers, Investment Advisers, and Research Analysts, the SDD has become one of the most important elements of their SEBI compliance framework. During inspections, SEBI routinely examines whether PMS/IA/RA firms maintain a tamperproof SDD, record all UPSI flows, and demonstrate a robust compliance framework aligned with regulatory expectations.

This note clarifies the SDD requirements, identifies common compliance challenges, and provides practical guidance based on Industry best practices. 

2. Regulatory Provisions Under Regulation 3(5)

Regulation 3(5) requires listed companies and intermediaries to maintain a Structured Digital Database containing:

• Nature of UPSI
• Names of persons sharing UPSI
• Names of persons with whom UPSI is shared
• PAN or other identifiers of such persons
• Timestamp details (date and time)

The SDD must be non-tamperable, audit-trailed, and capable of producing records promptly during a SEBI investigation.

For intermediaries offering SEBI compliance services or maintaining internal compliance departments, the SDD forms a core component of the risk management and compliance monitoring framework.

3. Regulation 3(6) and Communication of UPSI

Regulation 3(6) prohibits communication of UPSI except:

• In furtherance of legitimate purposes
• For performance of duties
• For discharge of legal obligations

Every permissible communication must be recorded in the SDD.

For Portfolio Managers, Investment Advisers, and Research Analysts, UPSI may arise through:

• Pre-trade decisions and model portfolio rebalancing
• Interaction with listed company management
• Research meetings and unpublished research insights
• Client portfolio actions relating to listed securities

Accordingly, UPSI identification is a fundamental part of SEBI PMS/IA/RA compliance requirements.

4. Practical Issues in Interpreting SDD Requirements

Industry experience suggests several recurring challenges for PMS, IA and RA firms:

a. Determining what qualifies as UPSI

Firms often under-report (missing UPSI events) or over-report (recording routine decisions).

b. Identifying all persons with whom UPSI is shared

This includes internal access persons and external fiduciaries such as consultants, auditors, lawyers, and technology vendors.

c. Ensuring timestamps and identifiers

SEBI expects real-time or near-real-time entries with precise date/time logs.

d. Maintaining a tamperproof system

Spreadsheets or editable documents are non-compliant.
The SDD must be capable of producing audit logs, a feature SEBI typically verifies during inspections.

e. Aligning SDD entries with other records

The SDD must correspond with:

• Email trails
• Meeting notes
• Research documentation
• Order logs
• Insider lists

This alignment is a key expectation when SEBI examines the quality of an entity’s regulatory compliance framework.

5. Examples of UPSI That Should Be Logged

For Portfolio Managers (PMS):

• Planned bulk trades before execution
• Portfolio rebalancing decisions impacting listed securities
• Client-specific investment actions affecting price discovery

For Investment Advisers (IA):

• Forward-looking investment recommendations
• Undisclosed reports provided to select clients
• Strategic advice received from or given to listed company insiders

For Research Analysts (RA):

• Draft research prior to publication
• Management interactions not available to public
• Sectoral insights containing unpublished material information

Recording these instances demonstrates ongoing compliance monitoring and readiness for SEBI inspection.

6. Who Should Be Included in the SDD?

The SDD should capture all persons who:

• Create UPSI
• Receive UPSI
• Facilitate transmission of UPSI

This may include:

• Directors and senior management
• Research analysts
• Portfolio managers and dealers
• Compliance personnel
• Operations and accounting teams (if exposed)
• Technology teams with access rights
• External advisers (legal, audit, consultants)
• Any fiduciary defined under Schedule C of the PIT Regulations

A comprehensive list demonstrates a strong SEBI regulatory compliance culture.

7. Insider List vs SDD – Distinct Compliance Tools

A common misconception is that the insider list and SDD are interchangeable. They are not.

SEBI expects entities to maintain both, and discrepancies between the two raise compliance concerns.

8. SEBI Inspection Focus Areas

SEBI examiners typically check:

• Whether the SDD is non-tamperable
• Whether UPSI entries are accurately captured with timestamps
• Whether all access persons appear in the SDD
• Whether SDD records match external trails (research notes, emails, meetings)
• Whether the entity maintains a robust SEBI compliance framework
• Whether periodic testing is performed as part of risk management and compliance monitoring

SEBI increasingly views SDD maintenance as a high-risk compliance area, especially for PMS, IA and RA entities.

9. Practical Recommendations

1. Adopt a dedicated SDD tool

Avoid Excel or editable formats. SEBI expects an audit-trailed system.

2. Train staff quarterly

Focus on research, dealing teams, analysts, and portfolio managers.

3. Integrate insider list and SDD processes

Ensure consistency across records.

4. Define UPSI clearly in internal policies

Link UPSI definitions to your Code of Conduct.

5. Conduct regular compliance testing

A key part of your risk management framework.

6. Engage a SEBI compliance consultant annually

External review supports regulatory defensibility and builds a stronger compliance culture.

Conclusion

For SEBI-registered Portfolio Managers, Investment Advisers, and Research Analysts, SDD compliance is not simply a technical requirement—it is a crucial part of the firm’s overall SEBI compliance framework and an area of heightened regulatory scrutiny.

Implementing a structured, well-managed SDD aligned with SEBI’s expectations significantly reduces insider trading risks and strengthens regulatory preparedness.