New Delhi: The Securities and Exchange Board of India (SEBI) is aiming to establish greater regulatory certainty and consistency in compliance among listed entities by proposing changes to the current definition of unpublished price sensitive information (UPSI). SEBI has observed instances where information or events that should have been classified as UPSI were not appropriately identified by the listed entities. In a consultation paper, SEBI suggested amending the current UPSI definition to include the necessary disclosures mandated by Regulation 30 of LODR (Listing Obligations and Disclosure Requirements).
SEBI has found that the judgement exercised by listed entities in determining whether an announcement should be categorized as UPSI, as well as their subsequent compliance with the legal requirements, is often insufficient. Currently, listed entities are obligated to promptly disclose to stock exchanges any material events or information, typically within 24 hours of their occurrence, as specified by Regulation 30 of LODR. These events include acquisitions, agreements, fraud or default by promoters and key managerial personnel, changes in securities, rating revisions, initiation of forensic auditing, and alterations in the board of directors and key managerial personnel.
Additionally, listed entities must disclose the outcomes of board meetings related to dividends, financial results, voluntary delisting, and other matters within 30 minutes of the meeting’s conclusion, as per the applicable rules.
To gain a better understanding of the types of announcements and information that listed companies were categorizing as UPSI, SEBI and the stock exchanges conducted a study. They analyzed approximately 1,100 press releases issued by the top 100 listed companies between January 2021 and September 2022. Among these press releases, it was found that in 227 instances, the adjusted price movement of the company’s shares was more than 2% compared to the movement of the Nifty/Sensex index. Surprisingly, of these 227 instances, only 8% of the press releases were classified as UPSI by the listed companies. When considering the total number of press releases, a mere 1.64% of them were categorized as UPSI.
In summary, SEBI aims to address the existing loopholes and inconsistencies in the identification and disclosure of UPSI by proposing amendments to the definition. By enforcing more stringent guidelines, SEBI intends to ensure that listed entities adhere to the spirit of the law and fulfill their obligations of transparency and disclosure, thereby enhancing market integrity and investor confidence.