SEBI Proposes Revisions To Insider Trading And Disclosure Regulations

SEBI has proposed a review of the definition of Unpublished Price Sensitive Information (UPSI) under the SEBI Prohibition of Insider Trading Regulations. This move aims to improve clarity, uniformity, and compliance in corporate disclosures. The consultation paper, released on November 9, 2024, seeks public comments until November 30, 2024. The proposed changes focus on enhancing transparency and curbing insider trading practices. “Thus, SEBI felt that there exists a need to review the definition of UPSI to bring about regulatory clarity, certainty, and uniformity in compliance for the listed companies,” the regulator said in the consultation paper.

What is UPSI?

UPSI refers to any information related to a company or its securities that is not publicly available and, if made public, could materially affect the price of the securities. When such information is revealed, it has the potential to influence investment decisions as well as the market's overall fairness.

Key Proposed Changes

SEBI's consultation paper proposes many important revisions to widen the scope of UPSI and improve disclosure processes.

The disclosure of agreements that impact the company's management and control is required by the initial proposal. This covers contracts including joint venture agreements, shareholder agreements, and family settlements. These agreements are deemed to be price-sensitive and need to be disclosed to ensure transparency.

Another important change is the disclosure of any management changes that occur inside the organization, such as appointments, removals, and any measures taken by judicial or enforcement authorities against important managerial persons. This will provide investors with insights into leadership stability and potential risks.

SEBI also proposes that any instances of fraud or defaults by a listed entity or its key personnel, including arrests of such individuals, be promptly disclosed. Such information could have a direct impact on the company’s reputation and its stock price, thus requiring timely disclosure.

UPSI will also cover adjustments to a company's capital structure. Any changes, including new issuances, buybacks, or other business activities, must be disclosed by the companies. According to the consultation paper, the stock exchange should be notified within 30 minutes of specific board meeting information pertaining to these modifications.

The report also emphasizes the necessity of disclosing debt settlements, the results of insolvency processes and the current state of disputes. To guarantee that all market participants have access to the same information these developments which could have a substantial impact on a company's financial standing, need to be made public.

Finally, SEBI suggests that the status of regulatory approvals or licenses, such as cancellations or suspensions, be disclosed. This will ensure that any regulatory changes affecting a company’s operations are transparently communicated to the market.

These proposed amendments are designed to ensure that companies disclose relevant, timely information, providing investors with accurate data to make informed decisions and maintain a fair market environment.