Background
Securities and Exchange Board of India (Prohibition of Insider Trading), regulations, 2015 [‘PIT’] vide its amendment notification dt: March 11, 2025, amended the definition of ‘Unpublished Price Sensitive Information’ as per reg. 2(1)(n) of PIT [‘UPSI’].
Post this amendment events that are ordinarily considered as UPSI have increased from five events to sixteen events. Question that arises is whether all these events stated in the definition of UPSI would be considered as UPSI by default or a listed entity can still defend stating that that the event(s) provided in the definition of UPSI is not UPSI?
Introduction
In this regard, the observations from the report of the High-Level Committee to Review the SEBI (Prohibition of Insider Trading) Regulations, 1992 under the chairmanship of Justice Sodhi on UPSI, is noteworthy. The Committee observed as follows: “The Committee also felt that some illustrative examples of what would ordinarily constitute UPSI should be set out to clearly understand the concept. It is 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.”
The Chief Executive Officer, Managing Director or such other analogous person of a listed company, intermediary or fiduciary shall put in place adequate and effective system of internal controls to ensure compliance with the requirements given in these regulations to prevent insider trading. Internal controls shall inter-alia include identification of UPSI[1]. Hence it means obligation is on the CEO or MD or analogous person to put in place adequate and effective systems for identification of UPSI.
So it means even if the list of events ordinarily considered as UPSI has increased from five to sixteen, still listed companies can defend whether a particular event specified in the definition of UPSI is not necessarily a price sensitive information for their company.
Precedents in identification of UPSI
SEBI in its adjudication order dt: June 8, 2021, in the matter of Mr. Kunal Kashyap and Allegro Capital Pvt Ltd in the matter of Biocon Ltd has stated that, “…the illustrations (as provided under the definition of UPSI) are not mandatorily UPSI, if proven otherwise….”
Further Hon’ble SAT in the matter of Anil Harish Vs. SEBI (date of Order-June 22, 2011) has held that whether an information is price sensitive information or not will depend on the facts and circumstances of each case. Also, Hon ‘able Supreme Court in SEBI vs. Abhijit Rajan (Civil Appeal No.563 of 2020, Decision dated September 19, 2022) has held that, “That the price sensitivity of an information has a correlation directly to the materiality of the impact that it can have on the price of the securities of the company. An information may materially affect the price of the security of a company either positively or negatively. The impact may be beneficial or adverse. The information should have the potential either to catapult the price of the securities of the company to a higher level or to make it plunge. The effect can be bullish or bearish. But the effect should be material and not completely insignificant”
Conclusion
Hence it can be seen that whenever any information or event is added in the definition of UPSI it does not necessarily mean that it would be mandatorily considered as deemed UPSI under PIT. As seen in above cases Hon’able Supreme Court, SAT, and SEBI has held that for any information or event to be UPSI it should be based on facts and circumstances of each case. Further the list of UPSI provided therein is just an illustrative list of UPSI and if proven otherwise then it may not be considered as UPSI.
Hence it can be inferred that the expanded list of UPSI as provided by SEBI in the amended definition of UPSI would still not be considered as UPSI if proven that it was not UPSI.
Reference
[1] Regulation 9A(1) read with 9A(2) of PIT
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Article is written by Vallabh Joshi
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