Code of Fair Disclosure (Regulation 8)

Most of the SEBI (Prohibition of Insider Trading) Regulations, 2015 work by forbidding what an insider may do — not communicate, not trade, not procure. Regulation 8 is different in temperament. It is an affirmative, company-facing obligation: it commands the board of directors of every listed company to formulate, publish and follow a Code of Practices and Procedures for Fair Disclosure of Unpublished Price Sensitive Information. The animating idea is that the surest antidote to insider trading is not punishment after the fact but fair disclosure before it — ensuring that unpublished price sensitive information (UPSI) is released to the whole market uniformly, promptly and on equal terms, so that the informational asymmetry on which insider trading feeds never arises. This chapter unpacks the bare text of Regulation 8, the eight principles in Schedule A, the role of the chief investor relations officer, the legitimate-purpose overlay added in 2019, and the way the regulator and tribunals have treated selective and lopsided disclosure.

Where Regulation 8 sits in the scheme

The 2015 Regulations are built around three operative prohibitions in Chapter II — the bar on communication or procurement of UPSI under Regulation 3, the bar on trading while in possession of UPSI under Regulation 4, and the carve-out for trading plans under Regulation 5. Chapter III then turns from prohibition to prevention. It contains just two regulations: Regulation 8, the Code of Fair Disclosure addressed to the issuer’s board, and Regulation 9, the Code of Conduct addressed to internal compliance. Regulation 8 is the outward-facing limb — it governs how the company speaks to the market; Regulation 9 is the inward-facing limb — it governs how the company restrains its own people.

Understanding this architecture is the single most common examiner trap. Regulation 8 is not a prohibition on any individual and is not itself a charging provision for a trade. It is a structural mandate: every listed company must have a published policy that institutionalises fair, simultaneous and need-to-know-based disclosure. Justice N. K. Sodhi’s High Level Committee, whose report produced the 2015 Regulations, deliberately framed fair disclosure as the ‘positive’ counterpart to the negative prohibitions, recognising that a market in which material information flows to everyone at once is structurally inhospitable to insider trading. For the historical arc of this thinking, see the chapter on the introduction and evolution from the 1992 Regulations.

The bare text of Regulation 8

Regulation 8 has two sub-regulations. Sub-regulation (1) provides that ‘the board of directors of every company, whose securities are listed on a stock exchange, shall formulate and publish on its official website, a code of practices and procedures for fair disclosure of unpublished price sensitive information that it would follow in order to adhere to each of the principles set out in Schedule A to these regulations, without diluting the provisions of these regulations in any manner.’ Sub-regulation (2) provides that ‘every such code of practices and procedures for fair disclosure of unpublished price sensitive information and every amendment thereto shall be promptly intimated to the stock exchanges where the securities are listed.’

Four obligations are embedded in this compact text and each is worth isolating for an examination answer. First, the duty falls on the board of directors, not on the compliance officer — the framing of fair disclosure is a board-level governance act. Second, the duty is to formulate and publish, and the publication must be on the company’s official website, making it permanently and publicly accessible. Third, the code must adhere to each of the Schedule A principles and may not dilute the Regulations — a company may make its code stricter but never weaker. Fourth, both the code and every amendment to it must be promptly intimated to the stock exchanges, ensuring the bourses (and through them the market) always have the current version. Note carefully that the obligation attaches to a ‘company whose securities are listed’ — intermediaries and fiduciaries owe parallel duties under Regulation 9, but the fair-disclosure code under Regulation 8 is the listed issuer’s burden.

Schedule A: the eight principles of fair disclosure

Schedule A — titled ‘Principles of Fair Disclosure for purposes of Code of Practices and Procedures for Fair Disclosure of Unpublished Price Sensitive Information’ — is the substantive heart of Regulation 8. The code a board adopts is not free-form; it must give effect to each of the following eight principles.

(1) Prompt public disclosure of UPSI that would impact price discovery, no sooner than credible and concrete information comes into being, in order to make such information generally available. (2) Uniform and universal dissemination of UPSI to avoid selective disclosure. (3) Designation of a senior officer as a chief investor relations officer (CIRO) to deal with the dissemination of information and disclosure of UPSI. (4) Prompt dissemination of UPSI that gets disclosed selectively, inadvertently or otherwise, so as to make it generally available. (5) Appropriate and fair response to queries on news reports and requests for verification of market rumours by regulatory authorities. (6) Ensuring that information shared with analysts and research personnel is not UPSI. (7) Developing best practices to make transcripts or records of proceedings of meetings with analysts and other investor-relations conferences available on the official website to ensure official confirmation and documentation of disclosures made. (8) Handling of all UPSI on a need-to-know basis.

Read together, the eight principles trace a coherent philosophy: information that can move prices must reach the market promptly (1, 4), uniformly (2), through an accountable officer (3), with candour towards rumours and analysts (5, 6, 7), and must otherwise be guarded (8). The notes on the core definitions of insider, connected person and UPSI are the natural companion here, because every Schedule A principle turns on what counts as UPSI in the first place.

Selective disclosure: the central mischief

Principles (2) and (4) together target the single evil that fair disclosure exists to defeat — selective disclosure, the practice of revealing market-moving information to a favoured few (a star analyst, a large institutional holder, a journalist) before, or instead of, the broad market. Selective disclosure is insidious precisely because the favoured recipient need not be an ‘insider’ in the classical sense; the company simply hands a trading advantage to a section of the market while everyone else is in the dark.

The remedy Schedule A prescribes is twofold. Principle (2) mandates uniform and universal dissemination as the default; principle (4) prescribes a cure — the moment any UPSI is found to have been disclosed selectively, inadvertently or otherwise, the company must promptly disseminate it generally so that the informational gap is closed and the market is levelled. The cure provision is what makes the regime workable: it accepts that human error will occur and obliges the company to neutralise it at once rather than to conceal the slip. The logic that animates Regulation 8 here is the same logic that animated the appellate reasoning in Hindustan Lever Ltd. v. SEBI, (1998) 18 SCL 311 (AA), where the appellate authority accepted that genuinely published, generally-known information about a merger could not found an insider-trading charge — the cure for asymmetry is disclosure, and once information is truly ‘generally available’, the mischief evaporates.

The Chief Investor Relations Officer

Principle (3) requires the board to designate a senior officer as the chief investor relations officer (CIRO) to deal with dissemination of information and disclosure of UPSI. The CIRO is the institutional answer to the diffusion-of-responsibility problem: without a named, senior owner, the duty to disclose fairly becomes everybody’s job and therefore nobody’s. By concentrating accountability for market-facing disclosure in one identified senior officer, Schedule A ensures there is always a person answerable for whether information went out uniformly and on time.

Students should not confuse the CIRO with the Compliance Officer defined in Regulation 2(1)(c). The Compliance Officer is a creature of Regulation 9 and the Code of Conduct — a senior officer, financially literate and capable of appreciating the requirements of these Regulations, designated to administer the code of conduct, monitor trading by designated persons, maintain records and pre-clear trades. The CIRO under Regulation 8 faces outward to investors and the market; the Compliance Officer under Regulation 9 faces inward to the company’s designated persons. The two roles may, as a matter of practice, be vested in the same individual in a smaller company, but they are conceptually and textually distinct.

Rumours, analysts and the need-to-know rule

Principles (5), (6) and (7) govern the most porous channels through which UPSI can leak. Principle (5) requires an appropriate and fair response to queries on news reports and to requests by regulatory authorities to verify market rumours — a company may not stonewall a regulator’s rumour-verification request, nor may it use a ‘no comment’ selectively to confirm a rumour to insiders while denying it to the public. Principle (6) is the analyst safeguard: when management meets analysts and research personnel, it must ensure that the information shared is not UPSI. The danger is the analyst call or one-on-one meeting where, in the flow of conversation, management lets slip a guidance number or a deal in the works.

Principle (7) supplies the documentary discipline that polices principle (6): companies are to develop best practices for making transcripts or records of analyst and investor-relations meetings available on the official website, so that whatever was said to a few is contemporaneously confirmed to all and on the record. Principle (8) is the residual safeguard — all UPSI not yet ripe for public release must be handled strictly on a need-to-know basis, dovetailing with the ‘need-to-know’ legitimate-purpose framework that governs lawful internal communication of UPSI under Regulation 3.

The legitimate-purpose policy added in 2019

The single most important amendment to the fair-disclosure scheme came through the SEBI (Prohibition of Insider Trading) (Amendment) Regulations, 2018, with effect from 1 April 2019, broadly tracking the recommendations of the Committee on Fair Market Conduct chaired by T. K. Viswanathan. The amendment inserted a new sub-regulation 3(2A), which requires the board of directors of a listed company to make a policy for determination of ‘legitimate purposes’ as a part of the Code of Fair Disclosure and Conduct formulated under Regulation 8.

The amendment supplied an inclusive meaning: a ‘legitimate purpose’ includes the sharing of UPSI in the ordinary course of business by an insider with partners, collaborators, lenders, customers, suppliers, merchant bankers, legal advisors, auditors, insolvency professionals or other advisors or consultants, provided such sharing has not been carried out to evade or circumvent the prohibitions of the Regulations. A linked provision (sub-regulation 3(2B)) deems anyone who receives UPSI pursuant to a legitimate purpose to be an insider, and requires that such person be given due notice to maintain confidentiality. The exam point is the cross-reference: although the carve-out lives in Regulation 3, the policy that defines legitimate purposes is required to be embedded in the Regulation 8 code — so Regulation 8 today carries content that Regulation 3 generates. This interlock is examined more fully in the chapter on communication or procurement of UPSI.

Interface with the Listing Regulations

Regulation 8 does not operate in isolation. It dovetails with Regulation 30 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (LODR), which independently obliges a listed entity to disclose material events and information to the stock exchanges as soon as reasonably possible. Where the PIT Code of Fair Disclosure speaks of promptly making UPSI generally available, the LODR supplies the concrete machinery — filing with the exchanges within prescribed timelines, and (after the 2023 LODR amendments) a duty to confirm, deny or clarify market rumours in certain cases.

For examination purposes the relationship is best stated as complementary, not overlapping: the PIT Code of Fair Disclosure sets the principles (uniformity, promptness, need-to-know, candour on rumours), while the LODR prescribes the operational filing obligations through which those principles are discharged. A breach can therefore attract action under both frameworks. Both ultimately rest on the same definition of price-sensitive or material information that you should master from the definitions chapter.

Enforcement context and the role of intent

Because Regulation 8 is a structural mandate rather than a charging provision, enforcement specifically ‘under Regulation 8’ usually takes the shape of action for failure to formulate, publish or update the code, or for a code that dilutes the Regulations. The more consequential litigation arises when selective disclosure or non-uniform dissemination is alleged to have enabled a Regulation 3 or 4 violation, with the absence or laxity of the fair-disclosure code cited as evidence of systemic failure.

The recurring jurisprudential question is whether intent matters. In Rakesh Agrawal v. SEBI (Securities Appellate Tribunal, order dated 3 November 2003), the Tribunal grappled with the relevance of motive and the mens rea of an insider, taking a more nuanced view of culpability than a strict-liability reading would allow. The trend in later authority — reflected in decisions such as SEBI v. Abhijit Rajan, (2022) 9 SCC 728, where the Supreme Court emphasised that the object of insider-trading law is to prevent unfair advantage and looked to whether the trade could yield such advantage — reinforces why the affirmative, prophylactic design of Regulation 8 matters: if the company genuinely makes UPSI generally available on equal terms, the very possibility of an unfair informational advantage is foreclosed before any question of intent arises.

What a compliant Code of Fair Disclosure must contain

A board drafting its Code of Fair Disclosure must reduce the eight Schedule A principles to working procedure. In practice a compliant code will (a) define UPSI by reference to Regulation 2(1)(n) and identify the kinds of information the company treats as price sensitive; (b) name the chief investor relations officer and vest in that officer the authority to disseminate; (c) prescribe the channels and timing of uniform dissemination — typically simultaneous filing with all stock exchanges and posting on the company website; (d) lay down a rumour-and-news-report response protocol consistent with principle (5); (e) regulate analyst and investor meetings, including a no-UPSI rule and the posting of transcripts under principles (6) and (7); (f) state the need-to-know handling rule of principle (8); and (g) since 1 April 2019, set out the policy for determination of legitimate purposes required by Regulation 3(2A).

Two drafting cautions follow from the bare text. The code must adhere to each principle — a code silent on, say, the rumour-response protocol is non-compliant even if otherwise robust. And the code may make obligations stricter than the Regulations but may never dilute them: a code that, for example, narrowed the definition of UPSI or excused selective disclosure to ‘long-term’ investors would be void to that extent. Boards should also remember sub-regulation (2): the code and every amendment must be promptly intimated to the exchanges, so an internally revised but unfiled code is itself a breach.

Regulation 8 versus Regulation 9: the clean distinction

Examiners frequently ask candidates to distinguish the two Chapter III codes, and a crisp table-style answer scores well. Regulation 8 — Code of Fair Disclosure: owner is the board; orientation is external (the market and investors); object is fair, uniform, prompt disclosure of UPSI; key officer is the chief investor relations officer; governing schedule is Schedule A; published on the website and intimated to stock exchanges. Regulation 9 — Code of Conduct: owner is the board / the organisation with day-to-day administration by the Compliance Officer; orientation is internal (designated persons and their immediate relatives); object is to restrain trading and communication by insiders through trading windows, pre-clearance, contra-trade restrictions and minimum holding periods; governing schedules are Schedule B (for listed companies and intermediaries) and Schedule C (for fiduciaries and other persons handling UPSI).

The mnemonic that captures it: Regulation 8 tells the company how to talk to the market; Regulation 9 tells the company’s people how to behave in it. Both are preventive limbs sitting atop the prohibitions, and both should be read alongside the initial and continual disclosure obligations that complete the transparency architecture of the 2015 Regulations.

Exam strategy and common traps

For judiciary and CLAT-PG aspirants, Regulation 8 yields predictable, high-yield questions. Memorise that the duty rests on the board of directors (not the compliance officer); that the code adheres to Schedule A (Schedule B and C belong to Regulation 9); that publication is on the official website with intimation of the code and amendments to the stock exchanges; and that the code must not dilute the Regulations. Be able to list the eight Schedule A principles and to identify the CIRO under principle (3).

The traps to watch: do not say Regulation 8 prohibits trading — it does not; do not attribute the Code of Fair Disclosure to the compliance officer; do not place the legitimate-purpose policy in Regulation 8 alone — the requirement is created by Regulation 3(2A) (inserted with effect from 1 April 2019) but is to be housed within the Regulation 8 code; and do not confuse the CIRO (external, Regulation 8) with the Compliance Officer (internal, Regulation 9). For the doctrinal background to all of this, revisit the evolution from the 1992 Regulations and the hub of SEBI insider-trading notes.