Sebi proposes to tweak ’unpublished price sensitive information’ definition to bring uniformity
- The regulator made the proposal after observing that - the listed entities' judgement exercised in terms of the categorising announcement as UPSI and consequent compliance with the spirit of the law, are not found to be adequate.
To improve regulatory certainty and uniformity in compliance for listed companies in regards to the identification of specific events as unpublished price sensitive information (UPSI), capital markets regulator SEBI on Thursday proposed to modify the current definition of UPSI, according to a report from PTI.
The regulator made the proposal after observing that "the listed entities' judgement exercised in terms of the categorising announcement as UPSI and consequent compliance with the spirit of the law, are not found to be adequate."
The regulator proposed changing the definition of UPSI as it currently stands and bringing Regulation 30 of LODR (Listing Obligations and Disclosure Requirements) within it in its consultation document.
According to LODR Regulation 30, listed firms must notify stock exchanges as soon as possible and no later than 24 hours after the occurrence of any events or facts that are material. These occurrences included the following: any modification to securities, revision to ratings, initiation of forensic audits, change in director, and fraud or default by promoters or key managerial people.
In accordance with the guidelines, listed entities must also announce the outcomes of the board meeting relating to dividends, financial results, and voluntary delisting, among other things, within 30 minutes of the meeting's conclusion.
The Securities and Exchange Board of India (Sebi) has sought comments from the public till June 2 on the proposal, said the PTI report.
According to the consultation document, Sebi found that the listed company had failed to classify an information or event as UPSI on numerous occasions when it should have.
The PTI report said that Sebi and stock exchanges conducted a study to determine the kind of announcements and information that listed companies were categorising as UPSI. For the analysis, about 1,100 press releases issued by the top 100 publicly traded firms between January 2021 and September 2022 were taken into account.
Out of 1,099 news releases, 227 had price movements in the scrip that were greater than 2% after being corrected for Nifty/Sensex movement. Only 18 out of the 227 of these press releases, or 8%, were classified as UPSI by the listed companies. Additionally, just 1.64 percent of the 1,099 total press releases—or press releases—were classified 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. Sebi remarked that this demonstrated how businesses were not taking reasonable precautions in the situation.
Additionally, Sebi reported that its surveillance system produced a sizable number of warnings on suspected insider trading cases where it was seen that a sizable number of companies created notional profits, sometimes even exceeding ₹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.
The proposal for a review and rationalisation of the disclosure of material events or information by the listed firms was adopted by Sebi at its board meeting in March. The modifications that have been authorised include the addition of numerical thresholds for determining the "materiality" of events or information, disclosure of certain kinds of agreements involving listed entities, etc.
The modifications are intended to increase openness and ensure that listed firms promptly disclose material events or information.
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