Sebi elongates unpublished price sensitive information list

Critical Reg. 30 events assimilate into ‘illustrative guidance list’ of UPSI as SEBI strives for EoDB and easier compliance requirement

Refer amendment notified | Refer Consultation Paper

November 11, 2024 (updated on March 13, 2025)

– Vinita Nair | corplaw@vinodkothari.com 

If your idea of unpublished price sensitive information (‘UPSI’), which companies have to guard as confidential until disclosed to investors, is something which may impact the stock prices, you now have a longer list of things, which may seem purely operational or business-as-usual for listed companies, but still sitting in the long list of “deemed UPSIs” that SEBI (Prohibition of Insider Trading) Amendment Regulations, 2025 has inserted, thereby making compliance officers do the drill of structured digital database entry to even trading window closure every time such an event occurs. The amendment takes effect from June 9, 2025 .

In our view, price sensitivity of an event has to do with the impact of the event on the company’s profitability, turnover, long-term or short-term prospects, shareholding base, etc. The identification of these events is done based on the materiality of the event to the business and business model. The more prescriptive the lists supplied by the lawmaker are, the more one takes away the sense of responsibility and accountability to the corporate team that flags corporate events as material. If the lawmakers flag them all, or flag a lot, the very seriousness of tagging an information as price sensitive is taken away.

Does the present amendment go in the same direction of making the regulations more prescriptive? May not be the case necessarily as SEBI BM agenda clearly demonstrates that the intent was to provide illustrative guidance and not define a scope making the regulations prescriptive, in view of the EODB perspective. For e.g. in case of routine fund raising in the usual course of business, SEBI acknowledged the fact that if the fund raising is routine in nature and on predictable lines it would not materially affect the price and thus, may not be UPSI. It also took note of certain suggestions and considered them in the final amendment., for e.g. doing away with trading window closure requirements where UPSI is not emanating from within the listed entity, excluding change in ESG ratings from UPSI ambit, excluding reference of senior management in some cases etc.

Background:

The N.K. Sodhi Committee Report of 2015 , while reviewing the definition of UPSI which included ‘material events in accordance with the listing agreement’, emphasized that it would be important to ensure that regardless of whether the information in question is price-sensitive, no piece of information should mandatorily be regarded as “UPSI”. Thereafter, in 2018, noting that all material events which are required to be disclosed as per the LODR Regulations may not necessarily be UPSI under the PIT Regulations, the Committee on Fair Market Conduct , recommended the removal of the explicit inclusion of “material events in accordance with the listing agreement” contained within the definition of UPSI. As listed entities did not follow the principles laid down in UPSI definition, it was decided to elongate the list of deemed UPSI events to guide the entities better in UPSI identification.

Earlier in May 2023, SEBI had proposed considering every material event as UPSI. Based on the feedback received for earlier CP citing concerns of significant increase in compliance management and potential perpetual closure of trading window, SEBI had kept the proposal on hold till revisiting the framework for material events disclosure, market rumour verification, trading plan provisions etc.

In December, 2024 SEBI notified LODR amendments in Reg. 30 & Schedule III for EoDB (effective December 12, 2024). The Industry Standards Note issued in relation to Reg. 30 disclosures guide on the manner of ascertaining the expected impact on value relevant for the purpose of determining the materiality (read our article here). Trading Plans were made flexible (effective November 1, 2024) to enable persons perpetually in possession of UPSI be able to trade.

Present Amendment:

A. Deemed material events (Para A of Schedule III) added to the UPSI list

1. Change in rating(s), other than ESG rating(s) [sub-clause vi]
   ■ Upward/ downward revision to be considered UPSI.
   ■ New ratings for fresh issue of securities will get covered under ‘change in capital structure’ or ‘fund raising proposed to be undertaken’;
   ■ Considering ESG Ratings are at a nascent stage, SEBI has excluded ESG rating.
   VKCo Comments: Rating revision need not necessarily result in security/ instrument going below investment grade or resulting in a breach of any covenant, to be considered as UPSI. By virtue of the present amendment, revision from AAA to AA+ or from AA to AA (-) will also be considered as UPSI, as it will impact the cost of funds, investor’s perspective etc.
2. Fundraising proposed to be undertaken [sub-clause vii]
   VKCo Comments: Reg 29 covers intimation of fund raising by issue of securities, term loans are anyways excluded. While fundraising by way of issue of capital is deemed UPSI, every instance of debt issuance may not necessarily be UPSI. SEBI BM agenda further clarifies that if instances of fund raising are routine in nature then the particular would not materially affect the price of securities in the first place. Therefore, such fundraising events may not be considered as UPSI.
3. Agreements, by whatever name called, which may impact management or control of the company. [sub-clause viii]
   VKCo Comments: Where the company has knowledge about the agreement.
4. Fraud or defaults by the company, its promoter, director, KMP, or subsidiary or arrest of KMP, promoter or director of the company, whether occurred within India or abroad [sub-clause ix]
   VKCo Comments: Fraud and default to have the same meaning as assigned to them under LODR Regulations [Sch III, Part A, Para A (6)].
   ■ As explained in LODR, default by a promoter, director, key managerial personnel, subsidiary shall mean default which has or may have an impact on the listed entity.
   ■ Fraud, defaults, etc. by senior management may not generally have a material impact on the price of securities and therefore, the same has been not included within the ambit of the said clause.
5. Changes in KMP, other than due to superannuation or end of term, and resignation of Statutory Auditor or Secretarial Auditor [sub-clause v]
   VKCo Comments: MD/WTD/CEO not proposed to be re-appointed may be potential UPSI. Further, resignation of CFO or CS for better prospects, while may result in a change, may not be in the nature of UPSI. Resignations citing governance issues should be considered as UPSI.
   ■ Similarly, every instance of resignation by the statutory or secretarial auditor may not be UPSI. Resignation on account of corporate governance concerns, may be considered as UPSI.
6. Resolution plan/ Restructuring or one-time settlement in relation to loans/borrowings from banks/financial institutions [sub-clause x]
7. Admission of winding-up petition filed by any party / creditors, admission of application by the tribunal filed by the corporate applicant or financial creditors for initiation of CIRP against the company as a corporate debtor, approval of resolution plan or rejection thereof under the Insolvency Code [sub-clause xi]
8. Initiation of forensic audit (by whatever name called) by the company or any other entity for detecting mis-statement in financials, misappropriation/ siphoning or diversion of funds and receipt of final forensic audit report [sub-clause xii]
9. Action(s) initiated or orders passed within India or abroad by any regulatory, statutory, enforcement authority or judicial body against the company or its directors, KMP, promoter or subsidiary, in relation to the company. [sub-clause xiii]
   VKCo Comments: Intent is to include matters covered in Clause 19 and 20 of Para A. Clause 19 items viz. search or seizure, re-opening of accounts, investigation may be in the nature of UPSI, but each of clause 20 items may not be UPSI. Actions like suspension, disqualification, debarment or closure of operations may be in the nature of UPSI. However, in case of fines & penalties, SEBI amended the monetary limits for disclosure of fine or penalty under clause 20 – Rs. 1 lakh for fine/ penalty imposed by sector regulators/ enforcement agencies (as provided in ISN dated February, 2025) and Rs. 10 lakhs for other authorities. Amounts lower than the thresholds are required to be disclosed on a quarterly basis as part of the Integrated Filing (Governance). While imposition of penalty or fine by sector regulators/ enforcement agencies reflect on the state of governance/ functioning of the entity, every instance of levy of fine or penalty may not be UPSI.

B. Determined material events (Para B of Schedule III) added to UPSI list

1. Award or termination of order/contracts not in the normal course of business [sub-clause iv]
2. Outcome of any litigation(s)/dispute(s) which may have an impact on the company [sub-clause xiv]
3. Giving of guarantees or indemnity or becoming a surety, by whatever name called, for any third party, by the company not in the normal course of business [sub-clause xv]
4. Granting, withdrawal, surrender, cancellation or suspension of key licences or regulatory approvals. [sub-clause xvi]
   VKCo Comments: In our view, each of the events that is determined to be material by the listed entity are in the nature of UPSI. The clauses not expressly covered above viz. product launch, capacity addition, strategic tie-up, loan agreements not in the normal course of business etc can be in the nature of UPSI.

Actionable arising on UPSI identification under PIT Regulations

• Authorised KMPs to consider the illustrative guidance and the industry standards note for determination of expected impact of value (in case of Sch III Para B items) and determine if the information in hand is a UPSI.
  • The rationale should be recorded for future reference, in case of any query from stock exchange or SEBI in this regard.
• Closure of trading window for DPs in possession of UPSI;
  • Trading window shall not be closed for event / info emanating outside the listed entity;
  • The facility of PAN freeze is presently available only in case of financial results. In other cases, the DPs will be required to be informed about the trading window closure and opening.
• Recording of sharing of such UPSI, internally or externally, for legitimate purpose in the Structured Digital Database;
  • Recording of UPSI which is emanating outside the listed entity has to be made in SDD within 2 calendar days from the receipt of such information.
• Preserving the confidentiality of UPSI and ensuring making it generally available in accordance with the Code of Fair Disclosure.

Conclusion

While the present amendment indicating specific material events as illustrative guidance is better than the earlier proposal, law cannot prescribe an exhaustive list of UPSI events as it will differ from entity to entity. Given the diverse items of information that may be material, it will be impossible to have a closed list of all; therefore, the list of potential UPSI items (UPSI Library) needs to be formulated by every listed entity which is (a) Dynamic – it will have to be populated regularly, based on a feedback system and (b) Granular – the more granular the items are, easier it will be to assign the first point of responsibility and to minimise the nodes or the stop-overs that information travels, from its first source of recognition to the ultimate centre.