If Regulations 3 and 4 set the substantive prohibitions on insider trading, Regulation 9 is the engine that operationalises them inside the organisation. It compels every listed company, every market intermediary and every other person who handles unpublished price sensitive information (UPSI) to write a binding code of conduct, appoint a compliance officer, close the trading window before results, pre-clear sensitive trades, and police a six-month contra-trade bar. The code is not optional boilerplate; it is the privately enforced layer of insider trading law, and SEBI has increasingly held compliance officers and boards personally accountable when it fails.
What Regulation 9 actually requires
Regulation 9 is the bridge between SEBI's public enforcement machinery and self-regulation by the regulated entity itself. Regulation 9(1) commands that the board of directors of every listed company and the board of directors or head of every market intermediary shall formulate a code of conduct to regulate, monitor and report trading by its designated persons and their immediate relatives, adopting the minimum standards set out in Schedule B. The word "shall" leaves no discretion about whether to have a code; the only discretion is to make the code stricter than the statutory floor, never more lenient.
Regulation 9(2) extends the same obligation to a third category: the board of directors or head(s) of every other person who is required to handle UPSI in the course of business operations. This sweeps in professional fiduciaries and intermediaries who are not the issuer of the securities themselves — law firms, auditors, merchant bankers, analysts, consultants, registrars and the like. Such persons must formulate a code adopting the minimum standards in Schedule C. The architecture therefore distinguishes between insiders of the company (Schedule B) and outsiders who handle the company's UPSI (Schedule C).
Regulation 9 does not stand alone. It must be read with the substantive prohibition on trading when in possession of UPSI and the bar on communication or procurement of UPSI. A code under Regulation 9 is the procedural scaffolding that makes those substantive duties auditable. For the full statutory scheme, see the SEBI PIT Regulations hub.
Three codes, three schedules: A, B and C
Candidates routinely confuse the three schedules, so it is worth fixing their scope precisely. Schedule A contains the principles of fair disclosure of UPSI — this is the code of fair disclosure and conduct that the board adopts under Regulation 8, not Regulation 9. It governs how a company makes UPSI generally available (uniform dissemination, prompt disclosure, a designated officer for dealings with the exchanges). Schedule A is about the company speaking to the market.
Schedule B is the minimum standards for a code of conduct under Regulation 9(1) for listed companies and intermediaries, regulating trading by their own designated persons in the securities of the company. Schedule C mirrors Schedule B but applies under Regulation 9(2) to fiduciaries and intermediaries handling another entity's UPSI — it governs trading by their designated persons in the securities of that other listed company whose UPSI they possess.
The practical upshot: a single merchant bank advising on a takeover will simultaneously operate a Schedule B code for trades in its own listed scrip and a Schedule C code for trades in the target's scrip by the deal team. The two codes share most machinery — trading window, pre-clearance, contra-trade bar, compliance officer — but differ in the securities they ring-fence.
Who is a designated person?
The code's restrictions bite on "designated persons" and their immediate relatives, not on every employee. Regulation 9(4) requires the board of the listed company, in consultation with the compliance officer, to specify the designated persons to be covered by the code on the basis of their role and function in the organisation and the access that such role and function would provide to UPSI. This was a deliberate post-2018 reform: the earlier 1992 regime spoke vaguely of "designated employees," whereas the 2015 framework, as amended on the Kotak Committee's recommendations, demands a reasoned, access-based designation. The evolution from the prior regime is traced in introduction and evolution from the 1992 Regulations.
The regulation enumerates a floor that must be included: promoters and members of the promoter group, employees designated by the company, the CEO and employees up to two levels below the CEO, any support staff such as IT and secretarial staff who have access to UPSI. Designation is therefore a substantive compliance exercise, not a formality — under-designation that leaves a genuine UPSI-handler outside the code can itself be a violation. The interaction between designation and the underlying status of an insider, connected person and UPSI is examined separately.
The compliance officer: gatekeeper and lightning rod
Regulation 9(3) requires every listed company, market intermediary and other person formulating a code to identify and designate a compliance officer to administer the code and other requirements of the Regulations. The definition of "compliance officer" in Regulation 2(1)(c) demands a senior officer, designated so by the board, who is financially literate and is capable of appreciating the requirements for legal and regulatory compliance, reporting to the board of directors. Clause 1 of Schedule B reinforces this by requiring the compliance officer to report to the board and, in particular, to provide reports to the Chairman of the Audit Committee (or to the board where there is no audit committee) at such frequency as may be stipulated, but not less than once a year.
The compliance officer is the person who closes and opens the trading window, grants or refuses pre-clearance, maintains the initial and continual disclosures, and reports violations. Because so much turns on the officer's judgment, SEBI has not hesitated to penalise compliance officers personally. In the Future Retail Limited matter, the compliance officer granted pre-clearance to a promoter entity in March 2017 despite knowing that the entity's director, also FRL's CMD, was in possession of UPSI and had signed confidentiality undertakings. SEBI held that the officer failed to exercise due diligence and good faith in assessing the insider trading risk before clearing the trade, and imposed a monetary penalty for the breach of the Schedule B code read with Regulation 9. The case is a standing warning that pre-clearance is a substantive judicial-style assessment, not a rubber stamp.
The officer's independence is also structurally protected. Because the definition in Regulation 2(1)(c) requires reporting to the board, and clause 1 of Schedule B requires reports to the Chairman of the Audit Committee, the compliance officer is deliberately insulated from the operational management whose trades the officer must police. A compliance officer who reported to, say, the very CFO whose trades require clearance would face an obvious conflict; the upward reporting line to the board and audit committee is the antidote. Examiners frequently test this reporting line, so it is worth committing to memory that the compliance officer reports upward to the board, never sideways to management.
The trading window and its closure
The signature mechanism of the code is the trading window. Clause 3 of Schedule B requires designated persons and their immediate relatives to conduct all their dealings in the securities of the company only in a valid trading window and not to deal at all when the window is closed. Clause 4 governs closure: the trading window shall be closed when the compliance officer determines that a designated person or class of designated persons can reasonably be expected to have possession of UPSI.
The clause then fixes a mandatory minimum closure around financial results: the trading window restrictions apply from the end of every quarter until 48 hours after the relevant financial results are made public. In practice companies close the window for a longer lead-in period before board meetings considering results, dividends, buybacks, mergers, capital restructuring, expansion plans, changes in key managerial personnel, and similar UPSI events. The 48-hour gap after publication reflects the same logic as the substantive defence in trading while in possession of UPSI: information must become genuinely "generally available" before designated persons can act on it.
SEBI has progressively automated window enforcement. By circulars beginning July 2023, it directed depositories and exchanges to freeze the PAN of designated persons at the security level during the results-closure period for listed companies in a phased manner, and a 2025 circular extended that automated freeze to the immediate relatives of designated persons. Trading window closure is therefore moving from an honour-system prohibition to a hard-coded technical block.
One subtlety often missed is the carve-out: the trading window norm for designated persons is, by clause, not made applicable to certain transactions that are non-discretionary or already disclosed — for instance, exercise of ESOPs, off-market inter-se transfers between insiders who both possess the same UPSI, and transactions made under an approved trading plan. The logic is consistent: the window exists to stop opportunistic dealing on an information advantage, so transactions that carry no such advantage, or whose timing the insider cannot manipulate, fall outside its rationale. A candidate who can articulate why these carve-outs exist, rather than merely list them, demonstrates command of the provision.
Pre-clearance of trades
Clause 6 of Schedule B introduces a second filter. Trading by designated persons shall be subject to pre-clearance by the compliance officer if the value of the proposed trades is above such thresholds as the board of directors may stipulate. The threshold is left to each company, but the obligation to fix one is mandatory; promoters' trading thresholds in particular must be clearly defined in the code. No pre-clearance is needed when the trade is below the threshold or is executed under an approved trading plan, because the trading plan regime under Regulation 5 substitutes an ex-ante commitment for ex-post clearance.
Critically, clause 7 requires the compliance officer, before approving any trade, to seek a declaration from the applicant that they are not in possession of any UPSI; and the officer must have regard to whether such a declaration is reasonably capable of being rendered inaccurate. This is the precise duty the FRL compliance officer was found to have breached. Clause 8 permits the officer to require that documents executed to give effect to the trade carry a certification that the dealing complies with the code. The pre-clearance regime thus layers a contemporaneous, recorded representation on top of the statutory prohibition, making later denials of knowledge far harder to sustain.
Seven-day validity and the contra-trade bar
Pre-clearance is time-limited. Clause 9 of Schedule B requires that a pre-cleared trade be executed within seven trading days of the approval; if it is not, the designated person must seek fresh pre-clearance. The short validity window prevents an approval obtained in an information-clean moment from being used after the picture has changed — and any pre-clearance obtained while the window was open lapses the instant the compliance officer closes the window.
The same clause imposes the contra-trade restriction, one of the most heavily litigated features of the code. A designated person who buys or sells the company's securities shall not execute a contra trade — a sale or purchase of those securities — during the next six months following the prior transaction. If a contra trade is executed, inadvertently or otherwise, in violation of the restriction, the profits from such trade are liable to be disgorged for remittance to SEBI for credit to the Investor Protection and Education Fund (IPEF). The compliance officer may grant relaxation from the contra-trade bar for reasons recorded in writing, provided such relaxation does not violate the Regulations. The contra-trade rule is a bright-line, strict-liability style control: motive is irrelevant once the second leg falls inside the six-month period.
The rationale is preventive rather than punitive. A designated person who buys and quickly sells (or vice versa) within months is the classic profile of someone monetising short-term information; rather than litigate whether each such pair of trades was informed, the code simply forbids the pairing and disgorges the gain. SEBI adjudication orders are replete with contra-trade findings where the designated person pleaded inadvertence — a forgotten earlier purchase, a family member's parallel trade — and the plea failed, because the clause attaches to the fact of the contra trade and not to the trader's state of mind. The only safe course is for designated persons to track every transaction and for the compliance officer to run a contra-trade check at the pre-clearance stage itself, which is precisely why clause 7's declaration and clause 9's window operate in tandem.
The structured digital database
Although housed in Regulation 3 rather than Regulation 9, the structured digital database (SDD) is now inseparable from any discussion of the code's machinery, because the compliance officer typically maintains it. Regulation 3(5), inserted by the 2018 Amendment effective 2019, requires the board of directors or head(s) of the organisation to ensure that a structured digital database is maintained containing the nature of UPSI, the names of persons who have shared the information and the names of persons with whom it is shared, together with the Permanent Account Number or other authorised identifier.
By later amendment the SDD shall not be outsourced and shall be maintained internally with adequate internal controls and checks such as time-stamping and audit trails to ensure non-tampering. Regulation 3(6) requires the database to be preserved for a period of not less than eight years after completion of the relevant transactions, and where SEBI has commenced an investigation or enforcement action, the relevant information must be preserved until those proceedings conclude. SEBI and the exchanges have issued standard operating procedures (notably an NSE circular of October 2024) to standardise SDD compliance, and failure to maintain a contemporaneous SDD has become one of the most common code-of-conduct findings in adjudication orders.
Sanctions, disgorgement and reporting violations
A code without teeth is worthless, so the Regulations mandate enforcement architecture. Clause 12 of Schedule B (and the corresponding clause 10 of Schedule C), as substituted by amendment, provides that without prejudice to SEBI's own powers, the code of conduct shall stipulate the sanctions and disciplinary actions — including wage freeze, suspension and recovery — that may be imposed by the listed company for contravention of the code. Amounts collected in this manner are to be remitted to SEBI for credit to the IPEF.
Regulation 9 also builds an upward-reporting chain. The code must require designated persons to report violations to the compliance officer, who must in turn report any violation to the board and, in the case of a listed company, must promptly inform the stock exchange(s) where the securities are listed in the format prescribed by SEBI. The mandatory reporting of code violations to the exchanges was reinforced by SEBI's standardised-format circular of 19 July 2019. This converts what would otherwise be an internal HR matter into a publicly visible compliance signal, and gives SEBI an independent trigger for enforcement even where the company would prefer to bury the breach.
It is important for examination purposes to keep two distinct sanction tracks in view. The code sanctions under clause 12 — wage freeze, suspension, recovery, disgorgement of contra-trade profits — are imposed by the company itself, privately, and feed the IPEF. Running in parallel and entirely independent of them are SEBI's statutory powers under the SEBI Act, 1992, principally the monetary penalty for insider trading under Section 15G (not less than ten lakh rupees, extending to twenty-five crore rupees or three times the profits made, whichever is higher) and SEBI's power to disgorge, debar and prosecute. The Schedule expressly preserves these statutory powers with the phrase "without prejudice to the power of the Board." A company's internal punishment of a designated person therefore neither exhausts nor bars SEBI's own action; the two operate cumulatively, and a single contra trade can attract both an internal wage freeze and a Section 15G penalty.
Regulation 9A: institutional mechanism for prevention
Regulation 9A, inserted with effect from 2019, complements the code by imposing systemic preventive duties on listed companies and intermediaries. The CEO, Managing Director or such other analogous person must put in place adequate and effective systems of internal controls to ensure compliance — including all-employee awareness of the code, identification of all UPSI, restriction on its communication on a need-to-know basis, and lists of all employees and persons with whom UPSI is shared.
Regulation 9A(2) requires the audit committee or other analogous body to review compliance with these internal controls at least once a financial year and verify that the systems are adequate and operating effectively. Crucially, Regulation 9A(5) creates a whistleblower-style duty: in case it is observed that there has been a leak of UPSI or suspected leak, the listed company or intermediary must initiate an inquiry, inform SEBI promptly, and take such other steps as may be required. Regulation 9A converts insider trading prevention from a transaction-by-transaction control into a board-level governance obligation, dovetailing with the SDD and the code to form a three-layer defence.
Case law shaping code-of-conduct enforcement
While the code itself is administrative, the jurisprudence on insider trading frames how SEBI reads compliance failures. In Hindustan Lever Ltd. v. SEBI (the HLL–Brooke Bond Lipton matter), SEBI found that HLL had purchased BBLIL shares from the Unit Trust of India barely two weeks before the public announcement of the HLL–BBLIL merger while in possession of merger-related information, and directed compensation to UTI — an early demonstration that even a corporate insider's information advantage is actionable. The Appellate Authority's nuanced treatment of what counts as price-sensitive information continues to inform how compliance officers assess pre-clearance applications today.
In Rakesh Agrawal v. SEBI, the Securities Appellate Tribunal accepted that trading while in possession of UPSI may escape liability where the trade was bona fide and in the interest of the company rather than for personal profit — a holding that survives in spirit through the code's reliance on recorded declarations of intent. By contrast, in V.K. Kaul v. Adjudicating Officer, SEBI, the SAT upheld penalties against a connected person who traded on UPSI about Orchid Chemicals, relying on circumstantial evidence — call records, the timing and pricing of trades, and concealment — to infer insider trading. Kaul is the doctrinal foundation for SEBI's willingness, in code-of-conduct cases like FRL, to find a compliance failure on inference and probability rather than direct proof of knowledge. The substantive standard those cases apply is unpacked in trading when in possession of UPSI.
Exam pointers and common traps
For judiciary and CLAT-PG candidates, a handful of distinctions repay memorisation. First, do not conflate Schedule A (fair disclosure, under Regulation 8) with Schedule B (code of conduct, under Regulation 9(1)); the model code of conduct for the company lives in Schedule B, while Schedule A governs disclosure to the market. Second, remember the Schedule B/C split: B for the company's own designated persons, C for fiduciaries and intermediaries handling another company's UPSI under Regulation 9(2).
Third, fix the numbers: pre-cleared trades must be executed within seven trading days; the contra-trade bar runs for six months; the SDD must be preserved for not less than eight years; the trading window reopens 48 hours after results are public. Fourth, remember that contra-trade profits and code-sanction recoveries both flow to the Investor Protection and Education Fund, not to the company. Fifth, the compliance officer's defining statutory traits are financial literacy and reporting to the board (Regulation 2(1)(c)). Getting these granular facts right separates a strong answer from a vague one, because examiners test the mechanics of Regulation 9 far more often than its policy rationale.
Frequently asked questions
Who is obliged to formulate a code of conduct under Regulation 9?
Regulation 9(1) obliges the board of every listed company and the board or head of every market intermediary to formulate a code adopting the minimum standards in Schedule B. Regulation 9(2) extends the duty to every other person who handles UPSI — fiduciaries such as law firms, auditors and bankers — who must adopt the Schedule C standards.
What is the difference between Schedule A, Schedule B and Schedule C?
Schedule A is the code of fair disclosure of UPSI under Regulation 8 (how the company speaks to the market). Schedule B is the minimum code of conduct under Regulation 9(1) for a listed company's or intermediary's own designated persons. Schedule C is the parallel code under Regulation 9(2) for fiduciaries and intermediaries trading in another company's securities whose UPSI they hold.
How long does the contra-trade restriction last, and what happens if it is breached?
Under clause 9 of Schedule B a designated person who buys or sells the company's securities cannot execute a contra trade for six months. If a contra trade occurs, inadvertently or otherwise, the profits are liable to be disgorged and remitted to SEBI for credit to the Investor Protection and Education Fund. The compliance officer may relax the bar for reasons recorded in writing if it does not violate the Regulations.
Can a compliance officer be personally penalised for a code-of-conduct failure?
Yes. In the Future Retail Limited matter SEBI penalised the compliance officer for granting pre-clearance to a promoter entity despite knowing its director possessed UPSI, holding that the officer failed to exercise due diligence and good faith. Clause 7 of Schedule B requires the officer to assess whether a no-UPSI declaration is reasonably capable of being rendered inaccurate — pre-clearance is a substantive judgment, not a rubber stamp.
When must the trading window be closed and reopened?
Clause 4 of Schedule B requires closure whenever the compliance officer determines designated persons can reasonably be expected to possess UPSI. The mandatory minimum closure runs from the end of each quarter until 48 hours after the financial results are made public. SEBI now enforces results-period closure automatically by freezing designated persons' (and, since 2025, their immediate relatives') PANs at the security level.
What is the structured digital database and how does it relate to the code?
Under Regulation 3(5)-(6) the organisation must maintain an internal, non-outsourced structured digital database recording the nature of UPSI and the names and PANs of those who shared and received it, with audit trails, preserved for at least eight years (longer if SEBI proceedings are pending). The compliance officer who administers the Regulation 9 code usually maintains the SDD, and its absence is a frequent code-of-conduct finding.