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Unpublished Price Sensitive Information

UPSI (Unpublished Price Sensitive Information) is a piece of information about a company or its securities which is generally not available and upon becoming available will likely affect the price of securities materially. In simple terms, if an insider gets hold of a sensitive information and uses it in an unauthorized way to manipulate the price of certain securities, that information is called UPSI. Information about the below list can be considered as UPSI:

  • Financial results
  • Dividends
  • Change in capital structure
  • Mergers, de-mergers, acquisitions, delistings, disposals, expansions of business, and such other transactions
  • A change in the key personnel
  • Material events

Exceptions

However, entities like prospective investors, buyers who intend to take over the company sometimes require this kind of information. Non-public information is sometimes required to conduct due diligence on a company’s finances and business. Regulation 3 (3) of the Insider Trading Regulations allow firms to communicate unpublished price sensitive information for a particular transaction. These transactions can be:

  • Transactions entailing an obligation to make an open offer under the takeover regulations, only if the Board of Directors believes that the proposed transaction is in the best interests of the company.
  • Transactions not attracting the obligation to make an open offer under the takeover regulations, if the Board of Directors is of the informed opinion that the proposed transaction is in the best interests of the company and the information is made available at least two trading days prior to the proposed transaction taking place.

Insider as a connected person

Insider can be a person who has access to sensitive info which on going public, can manipulate the prices of securities materially. This amounts to cheating for a normal investor. An insider is:

(i) A connected person

(ii) In possession of or has access to unpublished price sensitive information.

A connected person is:

  1. Any person who has been associated with the company in any capacity that allows such person access to unpublished price sensitive information
  2. Persons falling into the below categories will be deemed as connected persons unless the contrary is established:
    • An immediate relative of connected persons specified in clause (i)
    • A holding company or associate company or subsidiary company
    • An intermediary as specified in section 12 of the Act or an employee or director thereof
    • An investment company, trustee company, asset management company or an employee or director thereof
    • An official of a stock exchange or of clearing house or corporation
    • A member of the board of trustees of a mutual fund or a member of the board of directors of the asset management company of a mutual fund or is an employee thereof
    • A member of the board of directors or an employee, of a public financial institution as defined in section 2 (72) of the Companies Act, 2013
    • An official or an employee of a self-regulatory organization recognized or authorized by the Board
    • A banker of the company
    • A concern, firm, trust, Hindu undivided family, company or association of persons wherein a director of a company or his immediate relative or banker of the company, has more than ten percent. of the holding or interest

Trading on the basis of UPSI

An insider is entitled to come up with a trading plan and present it to the compliance authorities for approval and public disclosure. Once approved, the trading plan will be irrevocable and the insider has to go ahead with the plan without any scope of deviating from it or executing any trade outside the scope of the trading plan. The insider also needs to provide certain disclosures on behalf of himself and his relatives/persons on whom behalf he makes trading decisions. The aim of these regulations is to prevent abuse in trading when in possession of UPSI.

So, this was an overview of Unpublished Price Sensitive Information. Let us know in the comments section if you want any specific topic to be covered. Wishing you all the best for your SEBI Officer Grade A preparation!

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