The​‍​‌‍​‍‌​‍​‌‍​‍‌ Indian market watchdog, the Securities and Exchange Board of India, (SEBI), has been incessantly revising its regulatory framework to elevate the level of transparency, put a stop to insider trading, and generally keep the market clean. It is its pivotal requirement for a Structured Digital Database (SDD) to be kept, a mandatory compliance measure for listed companies and market intermediaries, which is one of its most outstanding features. The need to have SDD is a big issue coming out of the SEBI circular. Thus, understanding the SEBI circular on SDD is a must for the companies that are eager to live up to the regulatory expectations and stay away from getting penalties.

The imposition of SDD is derived from the SEBI (Prohibition of Insider Trading) Regulations that compel companies to have a secure and internal system for the recording of unpublished price-sensitive information (UPSI) details. The main aim of this system is to ensure that any person accessing, sharing, or communicating the UPSI will be doing so under the documented terms, thus lessening the chances of fraud or unauthorised dissemination of information.

As per the SEBI circular, the SDD should have details of all the instances of the sharing of the UPSI along with the names of persons, their Permanent Account Numbers (PAN), the nature of the information shared, and the date and time of such communication. Thus, it forms an auditable trail readily accessible to the regulators when they need to verify allegations of insider trading.

Companies have an obligation to make sure that the SDD is in a non-tamperable digital format. Furthermore, the system is required to have the time-stamped entries, be sufficiently secured, and have limited access. SEBI states that the database should not facilitate any deletion or modification of records once they have been entered. This provision creates a safer environment and promotes the principle of trust that is essential in any information system.

Besides that, companies are obliged to audit their SDD regularly for the purpose of confirming that their records are up to date and that there are no loopholes. Another part of the SEBI Board's requirements is the appointment of a compliance officer to supervise the database, take care of the smooth running of the operations, and solve arising issues. This officer has to see that all the departments are following the communication protocols while managing the UPSI.

Another important issue dealt with in the circular deals with quarterly compliance reporting. Companies are required to provide evidence that their SDD is up and operating according to the regulatory norms. In cases when a business fails either to maintain or update the database, regulatory observations, fines, or even additional scrutiny will follow.

To comply with these requirements, numerous companies have taken up automated SDD compliance software that aids in error reduction, centralising the tracking, and auditing trails. Though SEBI has not prescribed any particular technology, it has set a strong expectation that the companies will have a reliable and robust system that will satisfy the standards laid down.

In essence, the release of the SEBI regarding the Structured Digital Database is a loud call to the business world to be transparent and strictly manage the information. For businesses implementing these measures is a sure way of compliance, gaining stakeholders' trust, and dodging regulatory troubles. In the wake of continuous refinement from SEBI, companies should not just stop their internal reporting structures from being overhauled but should also fortify them to be in line with higher ​‍​‌‍​‍‌​‍​‌‍​‍‌expectations.