Disclosures — Initial and Continual (Regulation 7)

If Chapters II and III of the SEBI (Prohibition of Insider Trading) Regulations, 2015 are the prohibitions — what an insider must not do — Chapter IV is the surveillance scaffolding that makes those prohibitions enforceable. Regulation 7, the heart of that chapter, compels the people closest to a listed company's price-sensitive information — its promoters, key managerial personnel, directors and designated persons — to lay their dealings in the company's own securities on the public record. The logic is disarmingly simple: an insider who knows that every meaningful trade will be reported to the company within two trading days, and onward to the stock exchange for the whole market to see, has far less room to disguise an opportunistic dealing as an innocent one. This chapter walks through the architecture of Regulation 7 — its initial and continual limbs, the value thresholds, the seven-day and two-trading-day clocks, the revised disclosure forms, and the now-automated system-driven disclosure regime — and shows how the disclosure obligation interacts with the substantive prohibition on trading while in possession of UPSI.

Where Regulation 7 sits in the scheme

The 2015 Regulations are built in two halves. Chapter II prohibits the communication or procurement of unpublished price-sensitive information (Regulation 3) and Chapter III prohibits trading when in possession of UPSI (Regulation 4). These are the conduct rules. Chapter IV, headed "Disclosures of trading by insiders", contains only two operative regulations — Regulation 6 (general provisions) and Regulation 7 (initial and continual disclosures) — but they perform the indispensable function of generating the audit trail against which the conduct rules are enforced.

Disclosure is not, in itself, a prohibition. A promoter who reports a sale of one lakh shares has complied with Regulation 7 even if that very sale is later found to violate Regulation 4. The two operate on different planes: Regulation 7 is about transparency and record-keeping; Regulation 4 is about the propriety of the trade. SEBI frequently proceeds on both fronts in the same matter — alleging an unlawful trade under Regulation 4 and, separately, a failure to disclose it under Regulation 7 — because each is an independent default attracting its own penalty under Section 15A or 15G of the SEBI Act, 1992. Understanding that separation is the first step to mastering this topic; it is also why a defence on the merits of a trade (as in SEBI v. Abhijit Rajan, discussed below) does not automatically cure a disclosure lapse.

Regulation 6 — the general provisions that govern every disclosure

Before Regulation 7 specifies who discloses what, Regulation 6 lays down four cross-cutting rules that colour every disclosure made under the chapter. First, Regulation 6(1) requires that every public disclosure under the chapter be made in such form as may be specified — which is the hook for the prescribed Forms A to D. Second, and critically for catching indirect dealing, Regulation 6(2) provides that the disclosures to be made by any person under the chapter shall include those relating to trading by that person's immediate relatives, and by any other person for whom such person takes trading decisions. This sweeps in the classic device of routing trades through a spouse, a dependent child or a controlled entity — the very stratagem at the centre of Rakesh Agarwal v. SEBI, (2004) 1 Comp LJ 193 (SAT), where the appellant acquired shares through his brother-in-law ahead of the public announcement of the Bayer AG acquisition of ABS Industries.

Third, Regulation 6(3) extends the disclosure net to trading in derivatives of securities, directing that the traded value of derivatives be taken into account for the chapter — closing the gap that would otherwise let an insider build a directional position synthetically. Fourth, Regulation 6(4) imposes a record-retention duty: disclosures made under the chapter must be maintained by the company for a minimum period of five years in the specified form. The "immediate relative" concept that anchors Regulation 6(2) is defined in Regulation 2(1)(f) and explored in our note on definitions of insider, connected person and UPSI.

Initial disclosure on the regulations taking effect — Regulation 7(1)(a)

Regulation 7(1)(a) is a one-time, transitional obligation. It required every promoter, key managerial personnel and director of every company whose securities are listed on a recognised stock exchange to disclose his holding of securities of the company, as on the date of the Regulations taking effect, to the company within thirty days of that date. Because the 2015 Regulations came into force on 15 May 2015, this limb operated as a baseline census of insider holdings at the moment the new regime switched on. Its practical importance today is historical and definitional rather than recurring — every company built its insider-holding register off these initial filings, and the continual disclosures under Regulation 7(2) are measured as movements away from that opening position.

Note what 7(1)(a) does not capture as a recurring matter: it is anchored to a single date. A company incorporated and listed after May 2015 never had a "date of these regulations taking effect" to report against; for its insiders, the operative initial-disclosure trigger is the appointment-based limb in Regulation 7(1)(b). The shift from the 1992 framework — which had a comparatively thinner disclosure architecture — to this structured, form-driven regime is part of the broader story told in our note on the evolution from the 1992 Regulations.

Initial disclosure on appointment or becoming a promoter — Regulation 7(1)(b)

Regulation 7(1)(b) is the recurring counterpart to 7(1)(a) and the one that matters in live compliance. It provides that every person on appointment as a key managerial personnel or a director of the company, or upon becoming a promoter or member of the promoter group, shall disclose his holding of securities of the company as on the date of appointment or becoming a promoter, to the company within seven days of such appointment or becoming a promoter. The disclosure is made in the prescribed Form B.

Two features deserve emphasis. The clock is seven days — markedly tighter than the thirty-day window of the transitional limb — reflecting that a newly appointed director who already holds shares is precisely the person whose pre-existing position the market needs to know. And the trigger is status-based: it fires on the event of appointment or accession to the promoter group, regardless of whether the person trades at all. A director who holds zero shares on appointment must still file a nil Form B; the obligation is to disclose the holding, even if that holding is nothing. The defined terms "key managerial personnel", "promoter", "director" and "designated person" — each load-bearing here — are unpacked in our note on definitions.

Continual disclosure by insiders — Regulation 7(2)(a)

Regulation 7(2)(a) is the workhorse of the chapter. It requires every promoter, member of the promoter group, designated person and director of every company to disclose to the company the number of such securities acquired or disposed of within two trading days of the transaction, if the value of the securities traded — whether in one transaction or a series of transactions over any calendar quarter — aggregates to a traded value in excess of ten lakh rupees. The disclosure is made in Form C.

Several mechanics repay close reading. The threshold is a traded value of more than ten lakh rupees, not a number of shares — so the trigger scales with price. It is measured either per transaction or by aggregating a series of transactions across a calendar quarter, which prevents an insider from staying below the radar by splitting one large dealing into many small ones. The 2018 amendments expanded the obligated class to expressly include "members of the promoter group" and "designated persons", widening the net beyond the original promoter-director-KMP triad and aligning the continual-disclosure population with the persons a company is independently required to track. And the two-trading-day clock runs from the transaction, not from quarter-end, so a single dealing that itself exceeds ten lakh rupees must be reported promptly even mid-quarter. Crucially, the disclosure must capture trades routed through immediate relatives and persons for whom the insider takes trading decisions, by force of Regulation 6(2).

The company's onward reporting — Regulation 7(2)(b)

Disclosure to the company would be of little use to the market if it stopped there. Regulation 7(2)(b) closes the loop: it requires the company to notify the particulars of the trading to the stock exchange on which the securities are listed within two trading days of receipt of the disclosure, or from becoming aware of such information. The phrase "or from becoming aware of such information" is significant. It imposes an independent trigger on the company that does not depend on a defaulting insider actually filing — if the company comes to know of a reportable trade by any means, its two-day reporting clock starts running.

This drew careful analysis in SEBI's adjudicatory practice on when a company can be said to have "become aware" of a trade executed by a relevant person, and on the apportionment of liability between a silent insider and a company that learns of the dealing independently. The structure creates a two-stage relay — insider to company under 7(2)(a), company to exchange under 7(2)(b) — each leg carrying its own two-trading-day deadline and its own penal exposure. A company that receives a Form C but sits on it for a week is in default under 7(2)(b) even though the insider complied perfectly under 7(2)(a).

Discretionary disclosure by other connected persons — Regulation 7(3)

Regulation 7(3) is an enabling, not a mandatory, provision. It permits a company, if it so chooses, to require any other connected person or class of connected persons to make disclosures of holdings and trading in the company's securities, in such form and at such frequency as the company may determine, in order to monitor compliance with the regulations. The prescribed format is Form D.

The provision recognises that the statutory categories in 7(1) and 7(2) — promoters, the promoter group, KMP, directors and designated persons — do not exhaust the universe of people who may come into contact with UPSI. Bankers, lawyers, auditors, consultants and other connected persons may, depending on the company's risk assessment, be brought within a tailored disclosure regime. Because 7(3) is discretionary, a connected person's failure to file Form D is a breach only where the company has in fact required such disclosure; the obligation is contractual-cum-regulatory in origin rather than free-standing in the way 7(1) and 7(2) are. In practice, companies operationalise 7(3) through their internal Code of Conduct framed under Schedule B read with Regulation 9.

The disclosure forms and their 2021 revision

The disclosures under Regulations 7(1) and 7(2) are made in prescribed formats — Form A (initial disclosure under 7(1)(a)), Form B (initial disclosure on appointment under 7(1)(b)), Form C (continual disclosure under 7(2)(a)) and Form D (the discretionary disclosure under 7(3)). SEBI substantially revised these formats by Circular No. SEBI/HO/ISD/ISD/CIR/P/2021/19 dated 9 February 2021, which updated the columns and particulars to be captured — including more granular details of the securities, the mode of acquisition or disposal, and information aligned with the post-amendment disclosure population.

For students, the takeaway is that the forms are not mere administrative furniture: their contents define the scope of what must be disclosed, and an incomplete or inaccurate Form C is itself a disclosure default even if a filing was nominally made. The form, the threshold and the time limit are the three coordinates an examiner expects you to recite together — Form C, ten lakh rupees, two trading days for the continual limb; Form B, holding as on date of appointment, seven days for the appointment-based initial limb.

System-driven disclosures — automation of Regulation 7(2)

The most consequential operational change to Regulation 7 came not by amendment to the text but through SEBI's circulars on system-driven disclosures (SDD). By Circular No. SEBI/HO/ISD/ISD/CIR/P/2020/168 dated 9 September 2020, SEBI rolled out SDD for the continual disclosures under Regulation 7(2), to be implemented in phases. The mechanism: a listed company disseminates the PAN and demat account numbers of its promoters, members of the promoter group, designated persons and directors to the depositories; the depositories then track those persons' transactions across all exchanges where the company is listed and report them automatically to the stock exchanges.

The system went live around 1 April 2021, and SEBI subsequently provided — by its August 2021 circular on automation of continual disclosures as an ease-of-doing-business measure — that for companies that have complied with the September 2020 framework, manual filing of disclosures under Regulation 7(2)(a) and 7(2)(b) is no longer mandatory. The substantive obligation in the text remains, but its discharge is now largely automated. Note the limit of SDD: it covers the continual-disclosure relay of 7(2); the initial disclosures under 7(1) and the discretionary disclosures under 7(3) continue to be filed in the ordinary way.

Disclosure and the substantive prohibition — reading Abhijit Rajan

The relationship between disclosure and the trading prohibition is best understood through Securities and Exchange Board of India v. Abhijit Rajan, Civil Appeal No. 563 of 2020, decided by the Supreme Court on 19 September 2022. Rajan, the Chairman and Managing Director of Gammon Infrastructure Projects Limited, sold a block of GIPL shares on 22 August 2013, after the board had on 9 August 2013 approved the termination of certain shareholders' agreements — information made public only on 30 August 2013. SEBI alleged insider trading; the Securities Appellate Tribunal exonerated him; and SEBI appealed.

The Supreme Court dismissed SEBI's appeal, holding on the facts that although the actual gain or loss is immaterial, the motive to make a gain is an essential ingredient — and that Rajan, who sold into news likely to push the price up and did so out of a compelling necessity to rescue the financially distressed parent, lacked that motive. For our purposes the case carries two lessons. First, it concerned the substantive charge of insider trading under the predecessor 1992 Regulations, not the disclosure obligation; a defence to the trade does not erase a separate disclosure default. Second, it underscores why Regulation 7's transparency apparatus exists at all: it is precisely because proving the motive and propriety of an insider's trade is so contentious that the law insists, independently, on a contemporaneous public record of the dealing. The interaction with the merits-based prohibition is developed further in our note on trading when in possession of UPSI.

Disclosure and trading plans

Regulation 7's disclosure obligations operate even where an insider trades pursuant to a pre-cleared trading plan under Regulation 5. A trading plan, once approved and made public, provides a defence to the substantive prohibition in Regulation 4 — it lets an otherwise UPSI-laden insider trade on a schedule fixed in advance — but it does not switch off the duty to disclose the resulting trades. A promoter or designated person executing trades under a trading plan must still report acquisitions and disposals exceeding the ten-lakh threshold under Regulation 7(2)(a), and the company must still relay them under 7(2)(b).

The two regimes are therefore complementary: Regulation 5 addresses the legitimacy of trading despite possession of UPSI, while Regulation 7 ensures the market sees the trades regardless. An examiner who asks whether a trading-plan trade is exempt from disclosure is testing exactly this point — the answer is no. The mechanics of formulating, approving and publishing a plan are covered in our note on trading plans.

Consequences of a disclosure default

A failure to make a disclosure required by Regulation 7 attracts penalty under the SEBI Act, 1992. Where the default is a pure failure to furnish information, returns or reports to SEBI or a recognised stock exchange, Section 15A(b) of the Act is the charging provision; where the default is bound up with an insider-trading violation, the dedicated penalty in Section 15G comes into play. SEBI's adjudicating officers have, in a long line of orders, imposed monetary penalties on promoters, directors and designated persons for delayed or non-disclosure of Form C transactions, and separately on companies for failing to make the onward Regulation 7(2)(b) report to the exchange.

Three points of nuance recur in the orders. A disclosure default is generally treated as a continuing or technical breach distinct from the propriety of the underlying trade — so penalties can follow even where no insider-trading charge is sustained. The quantum is assessed under Section 15J factors (gain made, loss caused, repetitive nature). And the liability is allocated person-by-person: an insider's compliance does not insulate the company from its own 7(2)(b) default, and vice versa. This independent, dual-track exposure is what makes Regulation 7 a frequent and standalone head of charge in SEBI enforcement.

Regulation 7 in the wider compliance architecture

Regulation 7 does not operate in isolation. It sits alongside two other pillars of Chapter V. The company's code of fair disclosure under Regulation 8 governs how the company itself releases price-sensitive information to the public, while the code of conduct under Regulation 9 read with Schedule B governs how designated persons trade — including pre-clearance, trading windows and the very identification of "designated persons" whose dealings Regulation 7(2) then captures. The continual-disclosure obligation is, in this sense, the audit layer that sits on top of the conduct controls: the code of conduct restricts when an insider may trade, and Regulation 7 records the trades that do occur.

For a coherent revision map, treat Regulation 7 as the bridge between the prohibitions of Chapters II–III and the institutional controls of Chapter V. Begin with the SEBI PIT hub for the full chapter structure, then work outward to the substantive prohibition on trading, the trading-plan safe harbour, and the fair-disclosure code — each of which references back to the disclosure trail that Regulation 7 generates.