SEBI Paper on the definition of Unpublished Price Sensitive Information under SEBI (PIT) Regulations
?? People told me lies...……??
"You want to be a Company Secretary? It’s just filings and admin work."??
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Today I can confidently stand up and say:??
Being a company secretary isn’t just about ticking boxes on routine compliances anymore.
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In 2024, our role has transformed drastically.
From verifying market rumours to managing complex related party transactions, SEBI’s amendments have pushed us into a new era of Corporate Governance.??
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And now, SEBI is raising the bar again.
SEBI is all set to bring a key amendment in targeting one of the most sensitive and impactful laws we handle.??
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This isn’t just compliance— It’s a turning point for our profession.
Are we ready to lead this evolution?
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Why are these amendments sought to be brought? (legislative intent)
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Have you read this Consultation Paper of 2023?
“(vi) material event in accordance with Regulation 30 of SEBI (Listing? Obligations and Disclosure Requirements) Regulations, 2015.”
Rationale:
Striking Examples:
a. Acquisition Announcement:
A company announced an acquisition via a press release, claiming it would boost revenue and profits in a specific vertical. The stock price surged 4.79% in a day—yet, the information wasn’t marked as UPSI.
b. Record-Breaking Deal:
A company won its largest-ever deal, predicting significant revenue growth. The stock price rose 6.09% in a day—still, no UPSI categorization.
c. Insider Trading Loophole:
In a case of alleged insider trading, an employee argued that if the company didn’t label information as UPSI, how could the employee recognize it as such?
Eye-Opening Study Findings (Jan 2021 – Sep 2022):
A few kinds of announcement made in these press releases which SEBI warranted to be categorised as UPSI are as under:
But why does this matter?
The Broader Impact:??
SEBI has already brought changes in timelines and increased threshold for certain disclosure requirements under schedule III of SEBI LODR. Further SEBI also proposed to review provisions relating to trading plan for designated persons making it easy for designated persons to trade in shares of company when in possession of unpublished price sensitive information. As there is certainty in identification of events or information SEBI has now proposed to expand illustrative list of UPSI.
In view of this Background, the following events are now proposed to be included in the definition of UPSI:
Proposals:
Proposal 1. Change in Rating(s)
Relevant reference under reg 30: Clause 3 of Para A of Part A of Schedule III
Comment:
Revision: Only upward/downward revision in rating may be included in illustrative list of events in the definition of UPSI.
New Ratings: New Ratings are assigned to instruments issued by a listed entity. Such issuance would be covered either in current definition of UPSI [Regulation 2(1)(n)(iii)] “change in capital structure” or under the proposed inclusion “fund raising proposed to be undertaken”
Proposal 2. fund raising proposed to be undertaken.
Relevant reference under reg 30: Clause 4 of Para A of Part A of Schedule III
Comment:
a.?Decisions related to dividends, buyback of securities, changes in capital structure, financial results and delisting that are required to be disclosed as part of outcome of board meeting are already included in the current definition of UPSI.
b. The decision with respect to fund raising proposed to be undertaken” is currently not included in the definition of UPSI.
c. Therefore, the same is proposed to be included in illustrative list of events in the definition of UPSI.
Proposal 3. Agreements, by whatever name called, impacting the management and control of the company
Relevant reference under reg 30:
Clause 5 and 5A of Para A of Part A of Schedule III
Comment:
Sebi has proposed that only agreements, including shareholder, joint venture and family settlement, that affect the management and control of the company and are in the knowledge of the company should be considered price-sensitive and included in the illustrative list of events under the definition of UPSI.
Proposal 4. Fraud or defaults by a listed entity, its promoter, director, key managerial personnel, senior management, or subsidiary or arrest of key managerial personnel, senior management, promoter or director of the listed entity, whether occurred within India or abroad.
Relevant reference under reg 30: Clause 6 of Para A of Part A of Schedule III and Clause 9 of Para B of Part A of Schedule III
Comment:
This information would be considered as UPSI.
Proposal 5. Exclusion of superannuation or end of term, and inclusion of ?resignation of a Statutory Auditor or Secretarial Auditor
Relevant reference under reg 30: Clause 7 of Para A of Part A of Schedule III
Comment:
It is proposed to include resignation of a Statutory Auditor or Secretarial Auditor in the illustrative list in the definition of UPSI.
Proposal 6. ?Inclusion of Resolution plan/ Restructuring/one-time settlement in relation to loans/borrowings from banks/financial institutions
Relevant reference under reg 30: Clause 9 and 10 of Para A of Part A of Schedule III
Comment:
The regulator has proposed the inclusion of restructuring plans, one-time bank settlements and other significant financial restructurings as UPSI.
Proposal 7. ?Admission of winding-up petition filed by any party / creditors, admission of application by the corporate applicant or financial creditors for initiation of corporate insolvency resolution process (CIRP) of a listed corporate debtor and its approval or rejection thereof under the Insolvency Code.
Relevant reference under reg 30: Clause 11 and 16 of Para A of Part A of Schedule III
Comment:
1.????? Not all events in relation to corporate insolvency resolution process (‘CIRP’) listed in 16 of Para A of Part A of Schedule III such as Filing of application by the corporate applicant/Financial creditor or operational creditor, Filing of resolution plan with tribunal, Number of resolution plans received etc may impact share price.
2.????? Thus, only admission of petition for initiation of CIRP and approval / rejection of resolution plan by NCLT may be price sensitive.
3.????? On Similar lines, only admission of the winding up petition by NCLT may be price sensitive hence considered UPSI.
Proposal 8. Initiation of forensic audit (by whatever name called) by company or any other entity for detecting mis-statement in financials, misappropriation/ siphoning or diversion of funds and receipt of final forensic audit report.
Relevant reference under reg 30: Clause 17 of Para A of Part A of Schedule III
Comment:
1.????? Initiation of Forensic audit may be price sensitive.
2.????? Forensic audits as mentioned in the above sub-clause of LODR refers to those audits, (by whatever name called), which are initiated with the objective of detecting any mis-statement in financials, mis-appropriation/ siphoning or diversion of funds.
3.????? It does not seek to cover disclosure of audit of matters such as product quality control practices, manufacturing practices, recruitment practices, supply chain process including procurement and matters that would not require any revision to the financial statements disclosed by the listed entity.
4.????? The same is in line with SEBI FAQs dated November 27, 2020 on Disclosure of Information Related to Forensic Audit of Listed Entities.
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Proposal 9. Action(s) initiated or orders passed by any regulatory, statutory, enforcement authority or judicial body against the listed entity or its directors, key managerial personnel, senior management, promoter or subsidiary, in relation to the listed entity.
Relevant reference under reg 30: Clause 19 and 20 of Para A of Part A of Schedule III
Comment:
Clause 19 and 20 of Para A of Part A of Schedule III may be price sensitive and are proposed to be included in the illustrative list in the definition of UPSI. They cover the following:
(a) search or seizure; or
(b) re-opening of accounts under section 130 of the Companies Act, 2013; or
(c) investigation under the provisions of Chapter XIV of the Companies Act, 2013;
As well as
a) suspension;
(b) imposition of fine or penalty;
(c) settlement of proceedings;
(d) debarment;
(e) disqualification;
(f) closure of operations;
(g) sanctions imposed;
(h) warning or caution; or
(i) any other similar action(s) by whatever name called.
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Proposal 10. ? Inclusion of award or termination of order/contracts not in the normal course of business.
Relevant reference under reg 30: Clause 4 of Para B of Part A of Schedule III
Comment:
a.????? Events described in clause 4 of Para B of Part A of Schedule III i.e Awarding, bagging/ receiving, amendment or termination of awarded/bagged orders/contracts not in the normal course of business are expected to have a significant impact on the revenue and profitability of a company.
b.???? Given the potential to impact the financial performance of a company it is recommended to include such events in the illustrative list in the definition of UPSI at Regulation 2(1)(n)(iv) of PIT Regulations.
Proposal 11. outcome of any litigation(s) or dispute(s) which may have an impact on the listed entity.
Relevant reference under reg 30: Clause 8 of Para B of Part A of Schedule III
Comment:
a.????? Initial order and pendency or any litigation is available in the public domain i.e. website of the judicial authority; hence this may not be price sensitive.
b.???? ?However, the outcome of such litigations or dispute may be price sensitive and may be included in the illustrative list in the definition of UPSI.
Proposal 12. Giving of guarantees or indemnity or becoming a surety, by whatever named called, for any third party.
Relevant reference under reg 30: Clause 11 of Para B of Part A of Schedule III
Comment:
a.????? Guarantees/indemnity / surety, etc. can be in the usual course of business.
b.???? Nonetheless there may be instances where such guarantees/indemnity / surety, etc. are not in normal course of business and have the potential to adversely impact the financials of the listed entity.
c.????? Thus, they may be price sensitive and are proposed to be included in the illustrative list in the definition of UPSI.
Proposal 13. Granting, withdrawal, surrender, cancellation or suspension of key licenses or regulatory approvals.
Relevant reference under reg 30: Clause 12 of Para B of Part A of Schedule III
Comment:
The granting, withdrawal, or suspension of essential licenses or approvals should be disclosed as such events could significantly affect company operations.
Current UPSI Definitions:
As per regulation 2(1)(n) of PIT Regulations, 2015:
“ Unpublished price sensitive information" means any information, relating to a company or its securities, directly or indirectly, that is not generally available which upon becoming generally available, is likely to materially affect the price of the securities and shall, ordinarily including but not restricted to, information relating to the following: –
(i) financial results;
(ii) dividends;
(iii) change in capital structure;
(iv) mergers, de -mergers, acquisitions, delistings, disposals and expansion of business and such other transactions;
(v) changes in key managerial personnel.”
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Conclusion
My comments on the proposals:
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Why don’t all material events constitute to UPSI?
a.????? It has also been observed by the Securities Appellate Tribunal (“SAT”) that, whether material events would constitute price sensitive information, would depend on the facts and circumstances of each case.
b.???? SAT held that a particularly large order for an infrastructure company which, while a material event under the Listing Regulations, would not necessarily be price sensitive as it was in the company’s ordinary course of business.
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With warm regards,
Keep Smiling,
Saeed Shaikh
Footnotes:
3. Anil Harish v. SEBI (SAT – Appeal No. 217 of 2011)