Upsurge in UPSI list: Deemed UPSI or sensitivity dependant?
Critical Reg. 30 events assimilate into ‘illustrative guidance list’ of UPSI as SEBI strives for EoDB and easier compliance requirement
Team Vinod Kothari & Company | corplaw@vinodkothari.com
The idea of unpublished price sensitive information (‘UPSI’) is something which companies have to guard as confidential until disclosed to investors, as it may materially impact the stock prices. 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 list supplied by the lawmaker is, 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.
Pursuant to SEBI (Prohibition of Insider Trading) Amendment Regulations, 2025 (‘present amendment’) SEBI has amended UPSI definition, effective from June 10, 2025[1] inserting a longer list of information, some of which may seem purely operational or business-as-usual for listed companies. Whether each of this information will be regarded as “deemed UPSI”, thereby requiring compliance officers to do the drill of structured digital database entry to even trading window closure every time such an event occurs? While the amended definition seems indicative of this, the intent of the regulator seems otherwise. This article tries to explain.
Linking UPSI determination with material events under Reg 30 : the journey
The idea of linking UPSI determination with Reg 30 events is not new. In fact, the definition of UPSI under PIT Regulations originally included “material events in accordance with the listing agreement”, within the definition of UPSI. The same was subsequently omitted vide Amendment Regulations, 2018 effective from 1st April, 2019.
The omission of material events under LODR from the definition of UPSI was a result of the recommendations of the Committee on Fair Market Conduct, under the Chairmanship of Shri T.K. Viswanathan. The Committee noted that every material event under LODR is not necessarily price sensitive, and therefore, the explicit inclusion of the same as UPSI is not appropriate.
The Committee noted that the aforesaid regulation require disclosures of material events or information which may or may not be price sensitive. Accordingly, the Committee is of the view that all material events which are required to be disclosed as per the Regulation 68 of the LODR Regulations may not necessarily be UPSI under the PIT Regulations. Since, the definition of UPSI is inclusive, the Committee recommends the removal of explicit inclusion of “material events in accordance with the listing agreement” in the definition of UPSI.
Thereafter, SEBI vide a Consultation paper dated May 18, 2023, proposed restoration of material events under LODR in the definition of UPSI. The public feedback largely pointed out that all events or information under Regulation 30 of LODR Regulations may not have an impact on the price of securities, hence, it is not rational to extend the UPSI definition to all material events under Reg 30 of LODR.
In view of the same, another Consultation Paper was floated on 9th November, 2024 on expansion of the list of UPSI to include some specific events from Reg 30. Based on the public comments received on the Consultation Paper, SEBI in its Board Meeting dated 18th December, 2024 approved the said amendments to the definition of UPSI.
As mentioned above, the amendments have been notified vide the Amendment Regulations, 2025 effective from June 10, 2025 providing a long list of Reg 30 events within the meaning of UPSI.
List of information under definition of UPSI: illustrative or prescriptive?
The definition of UPSI contains two parts – (a) subjective meaning of UPSI, and (b) a list of events that may be considered as UPSI. To this end, the definition of UPSI reads as:
“unpublished price sensitive information” means … and shall, ordinarily including but not restricted to, information relating to the following:
XXX
The present amendment pertains to the second part of the UPSI definition. A question would arise on whether the list of events may be considered as indicative, illustrative of what may constitute UPSI, or prescriptive, providing a deeming status of UPSI to such events/ information without assessment of the probability of price-sensitive impact of such information.
The answer to the aforesaid has to be traced back from the recommendations of the High Level Committee to Review the SEBI (Prohibition of Insider Trading) Regulations, 1992.
The Committee also felt that some illustrative examples of what would ordinarily constitute UPSI should be set out to clearly understand the concept. 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. Towards this end, examples of events and developments information about which would ordinarily be regarded as UPSI, are listed – such as financial results, dividends, mergers and acquisitions, changes in capital structure etc.
XXX
To conclude, whether or not a piece of information is generally available or is unpublished would necessarily be a mixed question of fact and law. A bright line indicating the types of matters that would ordinarily give rise to UPSI are listed to give illustrative guidance. It could well also be possible that information from such events could be routine in nature and consistent with a long history. Information about the repetition of the same event on predictable lines would not render it to be UPSI unless deviated from. For example, the declaration of dividend at the same rate at which a company has declared dividend for the several years as per publicly stated dividend policy.
Hence, it can be well understood that the idea behind providing an illustrative list of events in the definition of UPSI is not to render the same as “deemed UPSI”, thus mandating the treatment of the same as UPSI. Rather, the intent is to provide illustrations for a better understanding of what may ‘ordinarily’, and not ‘mandatorily’, constitute UPSI.
As evident from the discussion in SEBI BM agenda, the events/ information added in the definition of UPSI pursuant to the present amendment are given for ‘illustrative guidance’. For instance, while addressing the comment 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. Similarly, in response to the comment on providing specific meaning of ‘impact on management’, it was stated that the same would make it prescriptive, which is not the intent of law.
Therefore, listed entities continue to have the power to determine UPSI based on the expected impact of such an event or information on the price of securities of such entities. The list of events under the definition of UPSI only provides an indicative guidance.
Applicability of the amendments
The Amendment Regulations, though notified on 11th March, 2025, are effective on the 90th day from the publication of the same in the official gazette, that is, 10th June, 2025. Does that mean that the listed entities are not required to identify an event falling under the ‘illustrative list’ as UPSI during the said period, even if the same is price-sensitive? Can a listed entity contend that the categorisation of an event as UPSI, where such an event is falling under the elongated “attention list”, though price-sensitive, is not mandatory for UPSI originating prior to 10th June, 2025?
In our view, such a stance cannot be taken. The intent of the regulations have also been such that required companies to evaluate every event or information, for potential price-sensitivity, and based on such judgement, categorise an information as UPSI until made generally available to the public at large. Therefore, one cannot take a view that such an event was not UPSI prior to the amendments becoming effective, and will take the character of an UPSI only after 10th June, 2025.
An example will make the case clearer. Concrete discussions with respect to a proposed fund raising commenced from 1st May, 2025. The board meeting for approval of the fund raising proposal will take place on 12th June, 2025. Will the listed entity be required to categorise the information as UPSI from 10th June, 2025 (effective date of applicability of the amendments) to 12th June, 2025 (board meeting date on which the final decision will be made and Reg 30 intimation will be provided to the stock exchanges making the information generally available)?
Here, what needs to be evaluated is whether, in accordance with the UPSI guidelines of the entity, the person(s) in-charge of the identification of UPSI has considered the information to be of a price-sensitive nature. If the answer is yes, the information should have been categorised as UPSI from 1st May, 2025 itself, regardless of the applicability of the amendments.
On the other hand, if the same was evaluated and not considered to be price-sensitive at the time the information was concretised, assuming there has been no further developments subsequently that would give the information the character of being price-sensitive, such an information would not require UPSI categorisation even after 10th June, 2025. A third scenario would be where the information was, in fact, price-sensitive from the time of its concretisation, that is, 1st May 2025, however, not evaluated for price-sensitivity on the account of not explicitly covered under the definition of UPSI. In such a circumstance, the information was actually an UPSI since 1st May, and should have been categorised as such from that time itself. Pursuant to the present amendments, such information that was price-sensitive but not taken care of in the appropriate manner, would now come under the “attention list” of the listed entities.
Need for elongating the ‘illustrative list’ of UPSI
The discussion above makes it clear that the elongated definition does not necessarily result in providing a deeming character of UPSI to the specified events/ information under Reg 30. In such a case, a question may arise on the relevance of providing such an elongated list of UPSI.
The need for the present amendment has been set out in the Consultation Paper and BM agenda of SEBI in the following manner:
However, contrary to expectations, a study conducted by SEBI along with stock exchanges, revealed that, after the amendment to the definition of UPSI in the PIT Regulations, which removed the expression “material events in accordance with the listing agreement”, by and large, companies were seen to be categorizing only the items explicitly mentioned in PIT Regulations as UPSI. The market feedback also suggested that most companies consider this to be a ‘uniform practice’. Therefore, in light of the above observations, SEBI felt that there exists a need to review the definition of UPSI.
Events included in the ‘illustrative list’ of UPSI
A. Deemed material events (Para A of Schedule III) added to the UPSI list
| Insertion in definition of UPSI | Relevant clause in LODR | Discussion in CP/ BM Agenda | VKCo guidance on UPSI categorisation |
| Change in rating(s), other than ESG rating(s) | New Rating(s) or Revision in Rating(s) | 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. | Instances of revision may ordinarily have a price-sensitive impact. Also, while withdrawal of ratings is not explicitly covered, it should also be covered |
| Fund raising proposed to be undertaken | the decision with respect to fund raising proposed to be undertaken including by way of issue of securities (excluding security receipts, securitized debt instruments or money market instruments regulated by the Reserve Bank of India), through … | If the fund raising is routine in nature and on predictable lines it would not “be likely to materially affect the price of the securities” and thus may not be UPSI | It is common for NBFCs and other financial sector entities to raise funds through issuance of NCDs. Being routine in nature, such fund-raising would not constitute UPSI pursuant to the present amendment. |
| Agreements, by whatever name called, which may impact the management or control of the company | Agreements covered by Clause (5) and (5A) of Para A of Part A | Original proposal under CP required two conditions: (i) agreements that impact the management and control of the company and (ii) are in the knowledge of the company However, pursuant to BM, agreements impacting either ‘management’ or ‘control’ have been included. | Usually agreements which may impact the management or control are price sensitive in nature. However, if the change is purely inter-promoter transfers or similar agreements, which may not impact the working or operations of the entity, a view may be taken |
| 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 | Fraud or defaults by a listed entity, its promoter, director, KMP, SMP or subsidiary or arrest of KMP, SMP, promoter or director of the listed entity, whether occurred within India or abroad | SMP excluded considering the same may not generally have a material impact on the price of securities of the listed entity. Such fraud, default or arrest should be in relation to the listed entity. | In determination of the materiality and hence, price-sensitivity of information under this clause, guidance may also be drawn from the ISN on Reg 30. Refer a brief note on the ISN here. |
| Changes in KMP other than due to superannuation or end of term, and resignation of a Statutory Auditor or Secretarial Auditor | Change in directors, KMP senior management, Auditor and Compliance Officer | MD/WTD/CEO not proposed to be re-appointed may be potential UPSI. Resignation of CFO or CS may be usual movement across entities, and , may not be in the nature of UPSI. On the other hand, any resignation citing governance issues, including that of an independent director, though not covered explicitly in the definition, should be considered as UPSI. Similarly, every instance of resignation by the statutory or secretarial auditor may not be UPSI. For instance, resignation on account of bandwidth or personal limitations of the auditor. .Resignation on account of corporate governance concerns, or indicating frauds/ accounting lapses etc may be considered as UPSI. | |
| Resolution plan/ restructuring or one time settlement in relation to loans/borrowings from banks/financial institutions | Resolution plan/ Restructuring in relation to loans/borrowings from banks/financial institutions. One time settlement with a bank | No threshold limit provided since the same pertains to Para A item under Schedule III. | |
| Admission of winding-up petition filed by any party /creditors and admission of application by the Tribunal filed by the corporate applicant or financial creditors for initiation of corporate insolvency resolution process against the company as a corporate debtor, approval of resolution plan or rejection thereof under the Insolvency and Bankruptcy Code, 2016 | winding-up petition filed by any party / creditors events in relation to the corporate insolvency resolution process of a listed corporate debtor under the Insolvency Code | Filing a winding-up petition itself is a material event requiring intimation to the stock exchanges. Admission of such a petition is the second stage, and while the same may be ‘price-sensitive’, it is not clear as to what would be ‘unpublished’ for the purpose of ensuring PIT controls on the same. This appears to be one of the instances of events emanating from outside the entity, and hence, relaxations w.r.t. SDD entries and trading window closure may be availed (see discussion below). | |
| 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 | Initiation of Forensic audit a) The fact of initiation of forensic audit along-with name of entity initiating the audit and reasons for the same, if available; b) Final forensic audit report (other than for forensic audit initiated by regulatory / enforcement agencies) on receipt by the listed entity along with comments of the management, if any. | While it was suggested to not consider receipt of final forensic report as UPSI, the suggestion was not accepted since the information regarding outcome of such forensic audit may also be UPSI | In our view, once the initiation of forensic audit is considered as UPSI, the said event, although disclosed as a material event, should continue to be considered as UPSI till the time the final forensic audit report is not made public. |
| 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, key managerial personnel, promoter or subsidiary, in relation to the company | Clause (19) and (20) of Para A of Part A of Schedule III | SMP excluded considering the same may not generally have a material impact on the price of securities of the listed entity | The explanation to the amended definition to UPSI provides that for the identification of events enumerated as UPSI, the guidelines for materiality referred to in para A of Part A will be applicable. Therefore, an imposition of penalty will require disclosure if the same exceeds the limits of Rs. 1 lakh by sector regulators/ enforcement agencies and Rs. 10 lakhs for other authorities. The materiality of an action taken vis-a-vis the price of the securities of the listed entity depends on various factors, such as criticality of the non-compliance warranting an action, severity of the action/ penalty, impact of the penalty on the reputation and profits of the listed entity etc. Hence, not each instance of action taken or penalty imposed would require identification as UPSI. Further, the UPSI under this clause, being an event emanating from outside the listed entity, relaxations with respect to SDD entries and trading window closure may be availed (see below) |
B. Events determined as material (Para B of Schedule III) added to UPSI list
| Insertion in definition of UPSI | Relevant clause in LODR | Discussion in CP/ BM Agenda |
| Award or termination of order/contracts not in the normal course of business | Awarding, bagging/ receiving, amendment or termination of awarded/bagged orders/contracts not in the normal course of business | Expected to have a significant impact on the revenue and profitability of the company. Materiality will be based on thresholds provided under Reg 30(4) of LODR read with the ISN on Reg 30. |
| Outcome of any litigation(s) or dispute(s) which may have an impact on the company | Pendency of any litigation(s) or dispute(s) or the outcome thereof which may have an impact on the listed entity | Initial order and pendency or any litigation is available in the public domain, hence, not UPSI.Materiality will be based on thresholds provided under Reg 30(4) of LODR read with the ISN on Reg 30. |
| Giving of guarantees or indemnity or becoming a surety, by whatever named called, for any third party, by the company not in the normal course of business | Giving of guarantees or indemnity or becoming a surety , by whatever name called, for any third party. | Only such guarantees that are not in normal course of business will be UPSI Materiality will be based on thresholds provided under Reg 30(4) of LODR read with the ISN on Reg 30. |
| Granting, withdrawal, surrender, cancellation or suspension of key licenses or regulatory approvals. | Granting, withdrawal , surrender , cancellation or suspension of key licenses or regulatory approvals | As regards the suggestion of defining key licenses and regulatory approvals, the same being dependent on the industry or sector, the same has not been defined separately. Here again, emphasis has been given on the likelihood of materially affecting the price of security of a listed entity for UPSI identification. |
In our view, wherever an event is determined to be material by a listed entity, under Para B or Para C or any other residual clauses, such events are in the nature of UPSI. Thus, the clauses not expressly covered by the definition of UPSI, viz. product launch, capacity addition, strategic tie-up, loan agreements not in the normal course of business etc can also be in the nature of UPSI, based on its expected impact on the price of the securities of the listed entity.
Actionables pursuant to the revised definition of UPSI
As discussed above, the definition of UPSI, so far as the items specified thereunder is concerned, is illustrative and not prescriptive. Items that are of routine nature, or otherwise, are not expected to have a material impact on the price of securities of the listed entity can be excluded from UPSI categorisation. This requires a listed entity to first of all, have internal guidelines for identification of an event/ information as UPSI. 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 based on probable impact on the relevant financial parameters (guidance may be drawn from the ISN on Reg 30 for Para B items), as well as feedback based on past events in the listed entity or relevant to such listed entity. The list should be (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.
Secondly, record is to be maintained with proper rationale for non categorization of an event or information as UPSI, particularly if the same falls within the illustrative list of UPSI as provided in the definition.
Needless to say, sensitisation of the relevant persons handling UPSI or such information that may be categorised as UPSI is crucial to ensure smooth functioning of the PIT controls.
Other amendments
In addition to the amendments made in the definition of UPSI, some guidance has been given with respect to UPSI not originating from within the listed entity.
- Entry in Structured Digital Database (SDD)
For information not emanating from within the listed entity, the SDD entry may be done within 2 calendar days from the receipt of such information.
- Trading window closure
For UPSI not emanating from within the listed entity, trading window closure is optional.
The SEBI Consultation Paper or BM Agenda does not have reference to the aforesaid amendments. However, it can be understood that in case of events not emanating from within the listed entity, the UPSI is neither germinated from the listed entity, nor does it have a journey as an UPSI prior to disclosure, since the disclosure is required to be made within a maximum of 24 hours from the receipt of such information.
The intent of trading window closure is to caution the Designated Persons against trading, while in possession of UPSI. However, for events emanating from outside the listed entity, there is hardly much time between the receipt of information by the listed entity and the publication of such information through stock exchange intimation, thus making it generally available. Refer a presentation on the trajectory of an information from UPSI to material event disclosure here (slide 28 onwards).
Hence, the closure of the trading window is not relevant in such circumstances. The concept of trading window closure and related compliances has been discussed in a short video here. Having said that, any person in receipt of UPSI is bound by the primary charging section of the PIT Regulations to ensure that no trade is undertaken by the person while in possession of UPSI, irrespective of whether the trading window is closed or not.
Conclusion
The present amendments bring in an illustrative list of items that may ordinarily be considered as UPSI, to provide guidance to the listed entities in ensuring compliance with the PIT Regulations in letter and in spirit. As discussed above, this cannot be taken to mean that a list of deemed UPSI has been provided, and the determination of UPSI remains with the listed entities based on the expected impact on the price of the securities. Further, while the new amendments are inspired from Reg 30 of LODR, the definition of UPSI is common for both equity and debt-listed entities. Here, it is also to be noted that Reg 51 of LODR, as applicable to debt-listed entities, requires disclosure of all price-sensitive information to the stock exchanges.
[1] 90th day from the date of publication in the Official Gazette.
Read More:
Sebi elongates unpublished price sensitive information list
Prohibition of Insider Trading – Resource Centre
Leave a Reply
Want to join the discussion?Feel free to contribute!