SEBI has issued an interpretive letter under the IG Scheme to HDFC Bank Limited (‘HDFC’) on July 25, 2016 on whether a trade by a portfolio manager (‘PM’) under a discretionary portfolio management scheme can amount to insider trading under the SEBI (Prohibition of Insider Trading) Regulations, 2015 (‘IT Regulations’), due to possession of unpublished price sensitive information (‘UPSI’) by a client. Under a discretionary portfolio management concept, a PM makes investments on behalf of a client, including the terms of such investments, and such decision-making of the PM is not influenced by the client. In this regard, SEBI has clarified the following:i.  Regulation 4(1) of the IT Regulations states that no insider “shall trade in securities that are listed or proposed to be listed on a stock exchange when in possession of unpublished price sensitive information.” Further, as per the explanatory notes to Regulation 4 of the IT Regulations, when a person trades in securities when in possession of UPSI, his trades are presumed to be motivated by knowledge and awareness of the UPSI.ii.  Accordingly: (a) when considering any dealing in securities, it is not relevant whether such dealing was direct or indirect; (b) under the IT Regulations, any insider when in possession of UPSI should not deal in securities of the company to which the UPSI pertains; and (c) even if such insider (having access to UPSI of a company) deals in such securities through a discretionary portfolio management scheme, the trades of insider will be presumed to be motivated by the knowledge and awareness of UPSI.