Sebi proposes to tweak 'unpublished price sensitive information' definition to bring uniformity

Capital markets regulator Sebi on Thursday proposed to tweak the current definition of unpublished price sensitive information (UPSI) to bring regulatory certainty and uniformity in compliance for the listed companies in respect of the identification of certain events as UPSI.

The proposal came after the regulator noticed that "judgment exercised by the listed entities in terms of the categorising announcement as UPSI and consequent compliance with the spirit of the law, are not found to be adequate".

In its consultation paper, the regulator suggested that the current definition of UPSI be amended, and the disclosures as required under Regulation 30 of LODR (Listing Obligations and Disclosure Requirements) be brought under it.

Under Regulation 30 of LODR, listed entities are required to disclose to the stock exchanges all events or information, which are material, as soon as possible and not later than 24 hours from the occurrence of such event or information. These events included acquisition, agreement, fraud or default by promoters as well as key managerial personnel, any alteration in securities, revision in ratings, initiation of forensic auditing and change in director and key managerial personnel.

In addition, listed entities need to disclose the outcome of the board meeting pertaining to dividends, financial results and voluntary delisting, among others, within 30 minutes of the closure of the meeting under the rules.

The Securities and Exchange Board of India (Sebi) has sought comments from the public till June 2 on the proposal. Going by the consultation paper, Sebi observed that on multiple instances, an information/event which should have been categorised as UPSI was not done so by the listed entity.

Sebi, along with stock exchanges, carried out a study to identify the kind of announcements/information the listed companies were categorising as UPSI. Around 1,100 press releases made by the top 100 listed companies between January 2021 and September 2022 were considered for the analysis.

Out of 1,099 press releases, in 227 instances, the price movement in the scrip, adjusted for the movement in the Nifty/Sensex was more than 2 per cent. However, of these 227 instances, merely 8 per cent (18) of press releases were categorised as UPSI by the listed companies. Further, if the total press releases (1,099) are considered, only 1.64 per cent of the press releases were categorised as UPSI by the listed companies.

In a case of alleged insider trading by an employee of a company, the employee contended that if the company itself did not consider the information as UPSI, then how could the employee have considered it to be so. This highlighted the fact that companies were not exercising due care in the matter, Sebi noted.

Further, Sebi said that its surveillance system also generated a significant number of alerts on suspected insider trading cases where it was observed that a substantial number of entities made notional profits, sometimes exceeding even Rs 25 crore. However, a significant number of these alerts could not be taken up for further examination by Sebi due to the non-categorisation of material information as UPSI by the listed companies.

In its board meeting in March, Sebi approved the proposal for review and rationalisation of the disclosure of material events or information by the listed entities. The changes approved include the introduction of quantitative thresholds for determining the 'materiality' of events/information, disclosure for certain types of agreements binding listed entities, etc.

The changes are aimed at bringing in more transparency and ensuring timely disclosure of material events or information by listed entities.

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