The Securities and Exchange Board of India (SEBI) has announced that promoters can pledge shares even after the trading window has been closed, provided they follow certain conditions. This clarification indicates that designated individuals may secure funds by pledging shares during the trading window closure, as long as the action is deemed to be in good faith and prior approval is obtained from the compliance officer.

The inquiry into this matter included reasons for pledging shares, such as utilizing employee stock options or raising funds for personal needs. SEBI reiterated that permission for such transactions can be granted if they are considered to be in good faith and approved within the company's internal framework. The compliance officer must verify the good intentions behind the transaction before granting approval for pledging or releasing shares.

SEBI stated that there is no definitive definition of what constitutes 'good intentions,' and each case should be evaluated individually. Companies are required to categorize such transactions through their code of conduct, and compliance officers are responsible for assessing the nature of each transaction. The restrictions on trading windows do not apply to designated individuals pledging shares, provided the actions are in good faith, such as raising funds, and prior approval has been obtained from the compliance officer, adhering to the relevant rules established by the board.

This guidance was issued following a request from Avenue Supermarts, seeking clarification under the SEBI Scheme, 2025, regarding the permissibility of pledging or releasing shares during the trading window closure and how such transactions would be treated under insider trading regulations. Regarding 'contra trade' restrictions, SEBI noted that redeeming pledged shares alters their 'beneficial ownership,' which could be interpreted as a sale. If any other purchase or sale occurs within six months before or after the redemption, restrictions may apply to those transactions.