Market regulator SEBI proposes to tighten norms for Unpublished Price Sensitive Information (UPSI) after it found a large number of corporates flouting current rules.

In a study conducted with stock exchanges, SEBI found that listed companies have categorised unpublished price-sensitive information wrongly in 92 per cent of instances.

SEBI studied 1,100 press releases and found that in 227 instances, the information put out led to a price movement of 2 per cent after adjusting for the index.

Definition of UPSI

Of these 227 instances, the information was categorised as UPSI in 18 instances. Therefore, the listed entities categorised it correctly only 8 per cent of the time, it said in a consultation paper issued on Thursday.

“Given the context, the judgment exercised by the listed entities in terms of categorising information as UPSI and consequent compliance with the spirit of law, are not found to be adequate. Therefore, in light of the recent review of disclosure requirements under Regulation 30 of LODR (Listing Obligation and Disclosure Requirement), for listed entities, it is felt that there is a need to review the definition of UPSI,” said SEBI.

It is proposed that the current definition of UPSI be amended, and the disclosures as required under Regulation 30 of LODR be brought under it. Disclosures under LODR Regulation 30 covers a wide gamut of corporate action including date of board meeting, any agreements signed with another party, press releases and other information that listed companies share with stock exchanges on a regular basis.

The amendment to the UPSI is also aimed at bringing regulatory clarity, certainty and uniformity in compliance for listed companies, it said.

SEBI has sought public comments on the proposal by July 2.

U-turn by SEBI

Makarand Joshi, Founder, MMJC and Associates, a corporate compliance firm, said this is a U-turn from the correction SEBI had made in 2019 and the industry may need some time to set up a framework to identify UPSI as it is an evolving concept.

“The proposed change may increase the compliance burden although unwarranted. Though concerns expressed by SEBI are appropriate, the remedial action proposed by it does not seem to be appropriate. If SEBI wants to take this remedial action, it has to amend Regulation 30(4) of LODR,” he said.

Prohibition of Insider Trading (PIT) has been the most happening subject in the last three years and there were eight amendments, 14 circulars from SEBI and Stock Exchanges, 26 informal guidances, and 3 FAQs comprising 59 questions. If this amendment happens, it would be the ninth amendment to SEBI PIT since 2019, said Joshi.

There is a concept of UPSI under SEBI PIT Regulations. Every UPSI is deemed material information, but every material information may or may not be UPSI. SEBI proposes to change this situation, he said.

However, Harish Kumar, Partner, Luthra and Luthra Law Offices India, said the proposal to bring ‘material event’ (as defined under LODR) within the purview of UPSI would not only help curb insider trading caused repeatedly for want of non-categorisation of material event as UPSI, but it will also provide the needed clarity and timely disclosure.