📚 PASS Research Analyst Certification Examination Difficulty: Beginner ℹ️ Info   ~5 min read
📌 Chapter 14.2 — Important regulations in Indian Securities Market

Imagine you are finalizing an earnings preview for a large-cap IT firm. During an analyst call, the CFO offhandedly mentions to a select group of institutional investors that the company is experiencing a significant delay in a major project, a detail not yet released to the stock exchanges. As a research analyst, your immediate professional instinct is to update your valuation model to reflect this potential revenue shortfall.

However, incorporating this ’leaked’ information before it is formally disclosed on the BSE or NSE platform creates an ethical and legal minefield that could compromise your firm’s reputation and your own license.

The Code of Practices and Procedures for Fair Disclosure of Unpublished Price Sensitive Information (UPSI) is designed precisely to eliminate this information asymmetry. Under SEBI (Prohibition of Insider Trading) Regulations, listed entities are mandated to formulate and publish a code of fair disclosure to ensure that all investors—from retail to institutional—receive material information simultaneously. For an analyst, this means you must rely solely on the company’s official disclosures, press releases, and filings on the exchange website rather than private channels, however authoritative they may appear.

Consider the contrast between ‘selective disclosure’ and ‘fair disclosure.’ Selective disclosure is a tool of market manipulation that favors insiders, whereas fair disclosure ensures that the market discovery process remains efficient and equitable. When you build your financial models, your inputs must be traceable to publicly available data. If you base your Buy or Sell rating on non-public information obtained through a private conversation, you not only risk a regulatory inquiry under the PIT regulations but also violate the core tenets of professional integrity.

Practically, this regulation shifts the burden of verification onto the analyst. If you hear a rumor from a company contact, your professional obligation is to check if that information has been filed with the stock exchange. If it has not, you must treat it as ’noise’ or ‘privileged information’ that you cannot legally integrate into your public-facing research reports. Adhering to these principles protects your valuation models from being invalidated by unexpected regulatory crackdowns and preserves your standing as a credible source of market intelligence.1

Nuance

⚠️ Nuance
Many candidates confuse the ‘Fair Disclosure’ code, which is a mandate for the listed entity to provide equal access to information, with the broader ‘Insider Trading’ prohibition that applies to anyone possessing UPSI. While the company sets the internal code for disclosure, you are individually responsible for how you consume that information. A common misconception is that if a company employee tells you something, it is ‘fair game’ for your research; in reality, acting on non-public information is a violation regardless of the source’s intent.

Check Your Understanding

Practice Question 1

A listed company’s CEO mentions a potential merger during a private investor conference that is not yet public. As a research analyst, which of the following is the correct course of action under the Principles of Fair Disclosure?

Practice Question 2

Which document outlines the requirements for a listed entity to prevent selective disclosure of material information?

This is a companion read for Section 14.2 — Important regulations in Indian Securities Market from PASS Research Analyst Certification Examination by Akhilesh Gururani, available on Amazon Kindle.

Copyright © 2026 Akhilesh Gururani. All rights reserved.

  1. Unpublished Price Sensitive Information (UPSI) refers to any information which is not generally available and which, if it becomes available, would likely affect the price of the securities. ↩︎