The Securities and Exchange Board of India (Sebi) has issued clarification regarding the pledging of shares by designated persons during trading window closures. According to the informal guidance provided to Avenue Supermarts, such pledging is permissible for bona fide purposes, including raising funds or exercising employee stock options (ESOPs), but it requires pre-clearance from the compliance officer. Sebi emphasized that compliance with insider trading regulations is essential, and the nature of each transaction must be evaluated on a case-by-case basis. The regulator stated that companies must classify these transactions through their internal code of conduct, with compliance officers responsible for determining the legitimacy of the pledging activities. Additionally, Sebi noted that the invocation of pledged shares could be treated as a change in beneficial ownership, akin to a sale, which may lead to restrictions if there are corresponding trades within a six-month window before or after the invocation.