Home/ Markets / Stock Markets/  Sebi proposes to tighten definition of price-sensitive information

NEW DELHI : Markets regulator Securities and Exchange Board of India (Sebi) on Thursday proposed to tighten the definition of unpublished price-sensitive information (UPSI) after it observed many listed companies were not following the law in spirit.  

UPSI is an insider event at the company that may have material impact on its stock price like news on mergers and acquisitions. 

Current rules say listed companies need to disclose any information that is price sensitive. But now Sebi has proposed to tweak the definition to say any material event needs to be disclosed. The current definition of UPSI was based on recommendations of the Fair Market Conduct (FMC) committee which submitted its report back in 2017.   

“In light of the recent review of disclosure requirements under Regulation 30 of LODR, for listed entities, it is felt that there is a need to review the definition of UPSI as well," Sebi said in the discussion paper. “It is, therefore, proposed that the current definition of UPSI be amended and the disclosures as required under Regulation 30 of LODR be brought under it."  

Material events cover any major developments that happen within the company and such events are covered under the listing agreements. However, not all material events are price sensitive information. Hence, Sebi had accepted the recommendation and allowed companies to disclose only those material events that may have price impact on the shares to be considered UPSI.    

 “The UPSI paper, when read with the proposed LODR amendments tabled end of March, will make the universe of UPSI very wide and include market rumours as well. So, rumours about investigations, notices could all become disclosable and treated as UPSI for trading window purposes," said Shruti Rajan, partner, Trilegal.  

In its last board meeting held on 29 March, Sebi proposed new quantitative thresholds for determining materiality of events, information and disclosures along with stricter timelines for disclosures, and verification of market rumours by top 100 listed companies.   

According to a study conducted by Sebi into 1,100 press releases issued by 100 listed companies between January 2021 and September 2022, there were 227 instances where the price movement in the scrip was more than 2%. However, in 209 of these 227 cases companies did not categorize the press release as UPSI. These include press releases related to the announcements on sales, strategic tie ups, potential investments, regulatory approvals, expansions including brand acquisitions, and product launches.   

“The judgment exercised by the listed entities in terms of categorizing information or announcement as UPSI and consequent compliance with the spirit of law, are not found to be adequate," said Sebi.

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Updated: 18 May 2023, 09:42 PM IST
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