Unpublished Price Sensitive Information - MMJC

Unpublished Price Sensitive Information (‘UPSI’) means any information, relating to a company or its securities, directly or indirectly, that is not generally available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 (i) financial results; (ii) dividends; (iii) change in capital structure; (iv) mergers, de-mergers, acquisitions, delisting, disposals and expansion of business and such other transactions; (v) changes in key managerial personnel.[1]

A bright line indicating the types of matters that would ordinarily give rise to UPSI are listed in the definition of UPSI to give illustrative guidance. It could well also be possible that information from such events could be routine in nature and consistent with a long history. Information about the repetition of the same event on predictable lines would not render it to be UPSI unless deviated from[2]. Whether or not a piece of information is generally available or is unpublished would necessarily be a mixed question of fact and law.[3]

It would be important to ensure that regardless of whether the information in question is price-sensitive, no piece of information should mandatorily be regarded as UPSI[4]. What is relevant is whether the event in question is likely to have a material effect irrespective of whether it actually impacted or not[5]. Such an effect on the price of the securities can be negative as well as positive[6]. So it needs to be ascertained whether any material information can be considered as UPSI or not?  

The definition of ‘UPSI’ does not pre-suppose that a PSI to become an ‘UPSI’ should essentially result in upward movement in the price of the scrip…”[7]. Further, in terms of Regulation 2(n), the list of determining material events is illustrative and the inherent discretion of the compliance officer has to be brought to bear to determine whether a particular piece of information is UPSI and thereby decide whether to close the trading window[8]. There are a host of factors that determine the existence of UPSI viz., nature of the transaction, progress of the discussions, the outcome of various stages of negotiations, increasing probability of transaction going through, etc. Therefore, for each matter, the entire facts and circumstances of the matter must be examined without giving undue weightage to any one facet, before arriving at the conclusion of the existence of an UPSI[9]

SEBI in a recent case has held that “In my opinion, a compliance officer being a professional and integral part of compliance of all the events of a company is reasonably expected to have access to all the major events culminating in a company. Therefore, it will be too naïve to assume that the compliance officer is not aware of such material event in the Company”[10]

Writer’s Remarks:  

SEBI assumes that Compliance Officer is aware of all material events happening in the company. SEBI casts the onus on the Compliance Officer for establishing processes for the identification of UPSI. Looking at the above decisions in the context of UPSI it becomes crucial for a compliance officers to understand whether every material information is UPSI? Also are there any thresholds that can be fixed for identifying UPSI?

We have seen instances where the Adjudication Officer / Securities Appellate Tribunal has held that an event / information-bearing impact up to 87.65% of the annual turnover is UPSI, as well as event / information-bearing impact up to 3.28% of annual turnover, is also UPSI. Therefore, companies should have adequate guidance viz. internal mechanism for identification of & evaluation of whether a particular information is UPSI or not.

Saurabh Agarwal

Partner

[1] Regulation 2(1)(n) of SEBI (Prohibition of Insider Trading) Regulations 2015

[2] Report of the High Level Committee to Review the SEBI (Prohibition of Insider Trading) Regulations, 1992, Para 33, Page 24

[3] Report of the High Level Committee to Review the SEBI (Prohibition of Insider Trading) Regulations, 1992, Para 25, Page 21

[4] Para 31 of Report of the High Level Committee to Review the SEBI (Prohibition of Insider Trading) Regulations, 1992

[5] SAT in the matter of B. Renganathan vs SEBI dt: March 24, 2021

[6] Order in the matter of insider trading activities of certain entities in the scrip of Tree House Education and Accessories Ltd dt: May 24, 2021

[7] SEBI in its Adjudication order in the matter of Tree House Education Ltd dt: May 24, 2021

[8] Adjudication Order in respect of IVL and Mr. Lalit Sharma in the matter of Indiabulls Venture Limiteddt: May 21, 2021

[9] Order in respect of Mr. Shreehas P Tambe in the matter of Biocon Ltd dt: June 30, 2021

[10] Adjudication Order in respect of IVL and Mr. Lalit Sharma in the matter of Indiabulls Venture Limited dt: May 21, 2021