By Sandeep Parekh
The Securities and Exchange Board of India (SEBI) released a consultation paper on November 9, 2024 proposing revisions to the definition of Unpublished Price Sensitive Information (UPSI) under the SEBI (Prohibition of Insider Trading) Regulations, 2015 (“PIT Regulations”). To this effect, Sebi has introduced 13 new proposals to broaden the scope of the UPSI definition to include certain material events specified under the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (“LODR Regulations”). These include, among others, revisions of credit ratings, proposed fund-raising activities to be discussed at Board meetings, agreements impacting the management and control of the company, initiation of forensic audits, outcomes of certain litigations, and the award or termination of significant contracts or orders not in the ordinary course of business. Some additions are well-founded, as such events significantly influence investor decisions and market movements. However, certain inclusions may dilute the framework’s purpose by covering routine operational matters or classifying less material disputes as UPSI.
The relationship between material events and UPSI has evolved over time. Initially, the definition of UPSI under the PIT Regulations included within its scope information related to all material events as per the listing agreement. However, an amendment to the PIT Regulations in April 2019 removed the direct link to materiality. Despite this, instances of failing to categorise information apart from those explicitly specified under the PIT Regulations continued to persist. To address this issue, Sebi released a consultation paper on May 18, 2023, proposing to align the definition of UPSI with material events under Regulation 30 of the LODR to improve clarity and ensure consistent compliance.
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In its latest consultation paper, Sebi aims to address concerns raised in public feedback regarding the proposal to include material events under Regulation 30 of the LODR Regulations within the definition of UPSI. These include concerns over the limited impact of all Regulation 30 events on securities prices, recommendations to prioritise specific material events, and difficulties in compliance management. In this context, determining whether a material event falls within the scope of UPSI requires evaluating whether events warranting disclosure are,
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