In a move that could increase disclosures from listed companies, the Securities and Exchange Board of India (Sebi) has proposed sweeping additions to the definition of unpublished price sensitive information (UPSI). The additions include credit rating changes, fundraising proposals, restructuring plans and defaults.
The regulator has outlined 13 proposals to broaden the scope of events that could affect stock prices such as resignation of auditor, change in key managerial personnel other than superannuation or end of term, major agreements affecting company control, fraud by a listed company or arrests of its key members.
This move comes after a study by Sebi showed that listed companies only disclosed material events to the stock exchanges that were explicitly mentioned in the insider trading regulations, and “not complying with the spirit of law”.
“Sebi felt that there exists a need to review the definition of UPSI to bring about regulatory clarity, certainty and uniformity in compliance for the listed companies,” the regulator said in a draft paper, inviting comments by November 30.
Developments in corporate insolvency cases and forensic audits —particularly if they uncover fund misappropriation or financial misstatements — have also been suggested for disclosure as price-sensitive events.
Orders passed by any regulatory or judicial bodies against a company or its key members, as well as the outcome of any litigation or dispute might also be considered sensitive information. Giving of guarantees or indemnity for any third party has also been suggested for inclusion.
Further, the granting, withdrawal or suspension of essential licences or approvals should be disclosed, the regulator proposed, as such events could significantly impact company operations. The termination or receival of any order not in ordinary course of business might also be included in the definition.
The regulator said the working group has “strived to ensure that its recommendations do not adversely impact the ease of doing business or significantly increase the compliance requirement of listed entities”.
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