SEBI Amends Insider Trading Regulations

On March 11, the Securities and Exchange Board of India (SEBI) notified amendments to the SEBI (Prohibition of Insider Trading) Regulations, 2015 (PIT Regulations), expanding the scope of unpublished price sensitive information (UPSI) and introducing flexibilities regarding information emanating from outside the company. The amendments will come into effect in three months.

The SEBI Board approved the amendments during its 208^th meeting on December 18, 2024.

Scope of UPSI expanded

Under Regulation 2(1)(n) of the PIT Regulations, UPSI refers to any information relating to a company or its securities that is not generally available, which, if made public, could materially affect the price of the securities. This provision provides a non-exhaustive list of items (such as dividends, financial results, etc.) that are considered UPSI.

A review of the definition was considered necessary after SEBI noted that companies were categorising only the events expressly mentioned in Regulation 2(1)(n), thus not complying with the law in spirit. Steps were taken to align the definition of UPSI with the events in Para A and Para B of Part A of Schedule III read with Regulation 30 of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (LODR Regulations). Each event was assessed to identify those that could potentially be price sensitive and was then recommended for inclusion in the definition of UPSI.

Accordingly, new events have been added to the UPSI definition by including Sub-clauses (vi) to (xvi) in Regulation 2(1)(n). UPSI will now include information relating to:

• Upward/downward revision in ratings: Changes in ratings (excluding ESG ratings);
• Decision regarding fund-raising: Fund-raising proposed to be undertaken;
• Agreements impacting management and control: Any agreements, by whatever name called, which may impact the management or control of the company;
• Fraud, defaults or arrests: Fraud or  defaults  by  the  company,  its  promoter,  director,  key  managerial  personnel (KMP),  or subsidiary  or  arrest  of  these individuals, whether occurring within India or abroad;
• Resolution plan in relation to loans: Resolution plan/restructuring or one-time settlement in  relation  to  loans/borrowings  from banks/financial institutions;
• Admission of winding-up petition and CIRP application: Admission of winding-up petition filed by any party/creditors and admission of application by the Tribunal filed by the corporate applicant or financial creditors for initiation of corporate insolvency resolution process (CIRP) against the company as a corporate debtor, approval of resolution plan or rejection thereof under the Insolvency and Bankruptcy Code, 2016 (IBC);
• Forensic audit: Initiation of forensic audit, by whatever name called, by the company or any other entity for detecting mis-statement in financials, misappropriation/siphoning or diversion of funds and receipt of final forensic audit report;
• Actions against the company, its directors, etc.: Actions initiated or orders passed within India or abroad, by any regulatory, statutory, enforcement authority or judicial body against the company or its directors, KMP, promoter or subsidiary, in relation to the company;
• Litigation outcomes: Outcome of any litigation or dispute which may have an impact on the company;
• Guarantees not in normal course of business: Giving of guarantees or indemnity or becoming a surety, by whatever name called, for any third party, by the company not in the normal course of business;
• Changes in regulatory approvals: Granting, withdrawal, surrender, cancellation or suspension of key licenses or regulatory approvals.

Existing provisions in Regulation 2(1)(n) have been modified, with Sub-clause (iv) now including information relating to awards or terminations of orders/contracts not in the normal course of business. Sub-clause (v) has been updated to clarify that changes in KMP will only be considered UPSI if they are not due to superannuation, term completion, or the resignation of a Statutory Auditor or Secretarial Auditor.

Flexibilities concerning information emanating from outside the company

For information emanating from outside the company, flexibility has been provided to make entries in the structured digital database on a deferred basis within two days. The same has been effected through the addition of a proviso to Regulation 3(5).

Moreover, a proviso added to Clause 4(1) in Schedule B to the PIT Regulations ensures that the trading window need not be closed for such information.