SEBI Seeks Broader Scope For UPSI Disclosure to Enhance Market Transparency

The capital market regulator, the Securities and Exchange Board of India (SEBI) has proposed to broaden the scope of Unpublished Price Sensitive Information (UPSI) to improve transparency in market disclosures.

Through the proposal, SEBI aims to include a range of new events under the UPSI definition, such as proposed fundraising activities, restructuring plans, and one-time bank settlements. This expansion is part of SEBI’s effort to ensure that investors are informed about critical corporate developments that could impact market prices.

SEBI’s Consultation Paper

In its consultation paper, SEBI has suggested that only specific types of agreements, such as shareholder agreements, joint venture deals, and family settlements, that directly affect the management and control of a company, and are known to the firm, should be considered price-sensitive. These agreements would be included in the illustrative list of events under the UPSI definition.

SEBI has also proposed that key developments in corporate insolvency proceedings, such as the initiation or approval of resolution plans by the tribunal, should be disclosed as potentially price-sensitive information. This would allow investors to have greater visibility into situations where a company is undergoing significant financial restructuring.

Additionally, the regulator has recommended that the launch or conclusion of a forensic audit—especially in cases involving fund misappropriation or financial misstatements—be considered price-sensitive and disclosed as such. The inclusion of forensic audits in the UPSI definition would enhance market transparency during investigations into serious corporate misconduct.

Objective of Change in UPSI

The proposed changes are aimed at increasing regulatory clarity and consistency in the definition of UPSI. Currently, decisions related to proposed fundraising activities are not included in the definition of UPSI, but SEBI’s consultation paper suggests their inclusion to ensure that such potential events are disclosed to the market in a timely manner.

Other significant financial events, such as restructuring plans and one-time bank settlements, would also be classified as UPSI. SEBI has recognised that such events can have a substantial impact on a company’s financial position and therefore must be disclosed promptly to avoid information asymmetry in the market.

Furthermore, the regulator has proposed that actions by regulatory or judicial bodies against a company or its key personnel—if they involve significant enforcement actions, fines, penalties, or other sanctions—should be considered price-sensitive and classified as UPSI. This would ensure that market participants are aware of any legal or regulatory actions that could have a material effect on a company’s financial performance.

The consultation paper also suggests that the outcomes of major litigations or disputes that could affect a company’s operations or finances should be disclosed as UPSI. Additionally, any major contracts or orders awarded to the company, or significant amendments or terminations to existing contracts, outside regular business activities, should be disclosed due to their potential impact on financial performance.

Finally, SEBI has proposed that the granting, withdrawal, or suspension of essential licenses or approvals should be considered price-sensitive information. Such events could significantly affect a company’s operations and, therefore, must be disclosed in order to ensure a level playing field for investors.

The Securities and Exchange Board of India (SEBI) has invited public comments on these proposals, with a deadline of November 30. The feedback received will play a crucial role in shaping the final regulatory framework for enhancing transparency in market disclosures.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.