1. Introduction:
The Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 2015 (“SEBI PIT regulations”), prohibit trading while in possession of Unpublished Price Sensitive Information (UPSI) and restrict its communication.[1]
Recent enforcement actions taken by SEBI indicate that UPSI may not confined to exact figures or final decisions. Even directional statements such as indicating likely growth, improved performance, deal closure, or price movement may qualify as UPSI if they enable the recipient to anticipate a material market impact.
In practical life often the insiders engage in informal conversations that stop short of disclosing exact figures.
The question, therefore, is not whether numbers were shared, but whether the substance and effect of the information conveyed was such that it could materially influence investment decisions. This article examines whether sharing directional information relating to price, growth, or prospects constitutes sharing of UPSI, based strictly on the statutory framework and SEBI’s interpretative approach in adjudication orders.
2. Statutory framework governing UPSI:
- Definition of UPSI:
Regulation 2(1)(n) of the SEBI PIT Regulations defines UPSI as any information which is not generally available, and which is likely to materially affect the price of the securities upon becoming generally available.[2]
The definition provides an inclusive list of examples such as financial results, dividends, changes in capital structure, mergers, acquisitions, and such other material events. Importantly, the list is illustrative and not exhaustive.
- Prohibition on communication of UPSI:
Regulation 3(1) expressly prohibits insiders from communicating, providing, or allowing access to UPSI to any person, except where such communication is in furtherance of legitimate purposes, performance of duties, or discharge of legal obligations.
3. Directional information: Conceptual understanding:
SEBI’s recent orders indicate that “directional information” refers to communication that does not disclose exact figures but conveys a clear qualitative message. [3]
For example, statements such as “Directions of profits are good!!” or “Company is going to make very good profit or company is going to declare huge profit in the upcoming announcement!” may not contain numbers, yet they send a definite signal about expected performance.
Such statements, while lacking numerical specificity, may still enable the recipient to draw predictive conclusions about future price movement. SEBI’s approach makes it clear that the test for UPSI is not the precision of the information shared, but whether it creates an informational advantage capable of influencing trading decisions.
4. SEBI’s approach in recent Adjudication Orders:
- Materiality determined by market impact, not language used
In the Nucleus Software Exports Limited[4] adjudication order, SEBI examined trading around the announcement of significantly improved financial results. The investigation noted that profits increased sharply, followed by an immediate and substantial rise in share price.
SEBI treated information relating to the company’s financial performance during the period of preparation of results as UPSI and concluded that informal discussions (i.e. Noticee in his reply submitted his statement “I knew that the company was going to make very good profit before the announcement as it was commonly discussed at the office”) around financial performance even prior to formal disclosure, constituted communication of UPSI when such discussions enabled the recipient to anticipate the positive price movement.
The order demonstrates that UPSI need not be a balance sheet or a profit figure; it is sufficient if the information conveys that results will materially exceed prior performance or expectations.
- Directional hints as a form of communication
In the Torrent Power Limited[5] (TPL) adjudication order, SEBI identified the UPSI period as commencing from the initiation of preparation of financial results, not from their finalisation or Board approval or when SDD entry was made.
The investigation established that the financial results had a demonstrable positive impact on the share price immediately upon disclosure. Trading by connected persons shortly before the announcement was held to be suspicious, even where no evidence existed of exact numbers being shared.
Let us break down the case.
A common misconception is that unless specific financial data or balance sheet figures are shared, the communication does not qualify as UPSI.
However, SEBI’s investigation into TPL revealed that an insider (Noticee-3), who was a General Manager in the Corporate Finance Department, shared “directional” insights with a friend (Noticee-1). The insider admitted to communicating that the company’s financial results for the quarter “looked good” and that the “directions of profits were good” due to higher power demand projections.
SEBI concluded that such directional information, even if characterized by the noticee as “general market information,” constitutes the communication of UPSI when shared by an individual with access to non-public financial performance data which enabled the person trading to take informed decision.
By applying the test of a coherent chain of circumstances and the standard of preponderance of probabilities, the regulator may legitimately infer misuse of UPSI from surrounding facts. In the TPL matter, call connectivity, location data, concentrated and atypical trading patterns, exclusive use of derivatives in a single scrip, and routing of trades through a related account collectively established a nexus between communication and trading. The case underscores that even directional or tacit exchanges, when supported by corroborative conduct, can attract regulatory liability under the PIT framework.
5. Conclusion:
SEBI’s enforcement actions make one position clear: sharing “directional” information is as risky as sharing numbers. Statements suggesting strong results, status of financial or operational performance, sharp price movement, or better-than-expected performance can amount to UPSI if they allow the listener to anticipate market impact.
From a regulatory perspective, the price movement is the consequence of UPSI. However, when a person states that the price is likely to rise sharply, such assertion typically implies possession of underlying UPSI, such as strong financial results, a major contract, or a material transaction. SEBI’s approach demonstrates that communication of such inferred outcomes, when supported by access to unpublished underlying information, may be treated as communication of UPSI. Accordingly, even if the specific event is not disclosed, conveying its expected market effect can attract the prohibition under Regulation 3(1), particularly where the communicator had access to UPSI and the communication enabled trading. Insiders should therefore avoid such informal conversations, hints, or qualitative cues about performance or prospects, even if no figures are disclosed.
[1] Regulation 3 and 4 – https://www.sebi.gov.in/legal/regulations/mar-2025/securities-and-exchange-board-of-india-prohibition-of-insider-trading-regulations-2015-last-amended-on-march-12-2025-_92672.html
[2] Regulation 2(1)(n) of PIT- “unpublished price sensitive information” means any information, relating to a company or its securities, directly or indirectly, that is not generally available which upon becoming generally available, is likely to materially affect the price of the securities and shall, ordinarily including but not restricted to, information relating to the following:……..
[3] Page no 36 of SEBI Adjudication order in the matter of Torrent Power Limited- https://www.sebi.gov.in/enforcement/orders/jan-2026/adjudication-order-in-the-matter-of-trading-activities-of-an-entity-in-the-scrip-of-torrent-power-limited_99117.html
[4] https://www.sebi.gov.in/enforcement/orders/sep-2025/adjudication-order-in-the-matter-of-suspected-insider-trading-activity-of-certain-entities-in-the-scrip-of-m-s-nucleus-software-exports-limited-_96808.html
[5] https://www.sebi.gov.in/enforcement/orders/jan-2026/adjudication-order-in-the-matter-of-trading-activities-of-an-entity-in-the-scrip-of-torrent-power-limited_99117.html