Companies taking UPSI disclosures lightly, finds Sebi study

The Securities and Exchange Board of India (Sebi) has proposed changing the definition of Unpublished Price Sensitive Information (UPSI) following an analysis that showed that companies were callous on most occasions to categorise an important piece of information as UPSI.

This assumes significance as UPSI is a very important parameter in the stock markets and refers to any information that has the potential to have a significant impact on the stock price of the company.

A study by the capital markets regulator analysed as many as 1,100 press releases that were issued by the top 100 listed companies between January 2021 and September 2022.

“… it was seen that, out of 1,099 press releases, in 227 instances, the price movement in the scrip, adjusted for movement in the Nifty/Sensex, was more than 2%. However, of these 227 instances, merely 8% (18) press releases were categorised as UPSI by the listed companies. Further, if the total press releases (1,099) are considered, only 1.64% of the press releases were categorised as UPSI by the listed companies,” stated the Sebi consultation report released on Thursday.

“It was further observed that the nature of information released/ announcement made in several of these press releases, indeed warranted it to be categorised as UPSI. However, the same was not categorised as UPSI by the entities,’ it added.

Interestingly, this leads to another issue for the regulator as many a times its surveillance systems generate an alert related to suspected insider trading – buying or selling shares based on UPSI – but it is unable to act as the information is not categorised as UPSI.

“Therefore, SEBI’s efforts towards curbing insider trading is hampered by the non-categorization of material information as UPSI by the listed companies,” stated the report.

The definition of UPSI was last amended in April 2019 when it was stated that UPSI would mean any information that is likely to materially affect the price and certain triggers – financial results, dividends, mergers/demergers and changes in key management personnel -- were mentioned though it was stated that UPSI will not be limited to only these triggers.

“It is, therefore, proposed that the current definition of UPSI be amended and the disclosures as required under Regulation 30 of LODR be brought under it. The amendment to the definition of UPSI is also aimed at bringing regulatory clarity, certainty and uniformity in compliance for the listed companies, in respect of identification of certain events/information as UPSI,” stated the Sebi consultation paper.

Among other things, Regulation 30 of LODR (Listing Obligations And Disclosure Requirements) states that the company needs to disclose all material information with certain criteria for determining materiality also laid down in the clause.

Further, all such disclosures have to be made on the stock exchanges within 24 hours of occurrence of the material development, adds the clause.

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