Written by Harshwardhan Sharma & Aarya Yadav

1. Introduction

The decision in the case of Chandrakala Vs Adjudicating Officer, SEBI (Appeal No. 209 of 2011 Securities Appellate Tribunal (SAT) Mumbai) made by SAT asserted that “If an insider trades or deals in securities of a listed company, it may be presumed that he/ she traded on the basis of unpublished price sensitive information (UPSI) in his/ her possession unless contrary to the same is established”. This ruling has been dictating the standard burden of proof among the cases where there has been a violation of UPSI regulations. These regulatory reforms which were announced on March 11, 2025 and became effective on June 10, 2025 indicate a more vigorous enforcement stance by the regulator by aligning the price-sensitive events with the disclosure requirements as introduced in the Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (LODR Regulations).The broader aim of these regulatory reforms is to bridge the gaps in regulations enabling the regulator to enforce disclosure policies and maintain market integrity.

2. UPSI Under the PIT Framework

The UPSI under Regulation 2 (1) (n) of the Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 2015 (the “PIT Regulations) is defined as “any information relating to a company or its securities, directly or indirectly, that is not generally available and which, upon becoming so, is likely to materially affect the price of the securities”. Previously the definition of UPSI was limited to a non-exhaustive list: financial results, dividends, changes in capital structure, mergers, demergers, acquisitions, de-listings, disposals, business expansion, and changes in key management personnel (KMP list).

The legal importance of UPSI lies in its use as a trigger for prohibitive actions. The materiality test determined whether information qualified as UPSI before the recent changes to the regulations. The test required determination of whether the information would affect investor decisions in the securities market through its impact on their decision-making process. The SEBI ruled in IPO of Onelife Capital Advisors Limited that companies must disclose only “material developments” while they do not need to report every standard business activity. Proof that the development had or would likely have a significant impact on the business and its financial instruments was required by the Tribunal. The materiality test serves as a crucial barrier that keeps information that could lead to market imbalances apart from regular business operations. It is strictly forbidden for insiders to engage in trading while in possession of or communicating with UPSI, unless they have a legitimate purpose.

SEBI has the power under Section 11 and Section 11C of the SEBI Act 1992 to conduct investigations and impose penalties. in addition to violation of these rules under Section 15G of the SEBI Act which provides for a monetary penalty in the form of a fine of ten lakhs to twenty-five crores or three times the earned profits, whichever is higher, violations of the SEBI Act or any rules or regulations made under it may result in criminal liability under section 24 which stipulates a maximum ten-year jail sentence, a fine, or both. Subject to SEBI’s enforcement discretion and judicial determination, such prosecution is not automatic and is only used in cases of serious or deliberate violations

3. 2024-25 SEBI Amendments: What’s new?

The 2025 amendments essentially transform the UPSI terrain by increasing the illustrative list previously consisting of five broad categories to sixteen specific events to reflect the discretionary longitude that was applied by the listed entities on the identification of price-sensitive information.

Event Category	Scope of UPSI inclusion
Contracts	Mergers, de-mergers, acquisitions, de-listings, disposals and expansion of business (Award or termination of orders/contracts not in the normal course of business.)
Personnel	changes in key managerial personnel (Resignation of Statutory or Secretarial Auditors; KMP changes (excluding superannuation).
Ratings	Any change in credit ratings, excluding ESG ratings.
Finance	Proposed fund-raising activities.
Agreements	agreements, by whatever name called, which may impact the management or control of the company
Fraud/Default	Fraud or defaults by company, promoters, directors, KMP, or subsidiaries; arrests of such persons, whether occurred within India or abroad
Forensic Audit	Initiation of forensic audits or receipt of final forensic audit reports.
Regulatory	Orders or actions by regulatory, statutory, or judicial bodies against the company or its directors.
Insolvency	Admission of winding-up petitions or initiation of Corporate Insolvency Resolution Process (“CIRP”).
Resolution Plan	resolution plan/restructuring or one-time settlement in relation to loans/borrowings from banks/financial institutions
Dispute	outcome of any litigation(s) or dispute(s) which may have an impact on the company;
Guarantee	giving of guarantees or indemnity or becoming a surety, by whatever named called, for any third party, by the company not in the normal course of business
Licenses	granting, withdrawal, surrender, cancellation or suspension of key licenses or regulatory approvals

Further amendments were done in the Regulations of the Securities and Exchange Board of India (Prohibition of Insider Trading), (Second Amendment) Regulations, 2024 that amended the Trading Plan framework under Regulation 5. The six-month cooling-off period was shortened to 120 calendar days; insiders are now allowed to stipulate a price limit within a 20 per cent band and the need to have at least 12 months coverage period has been abolished.

4. Reasons Behind the Expansion

The amendment was driven by the observations recorded in SEBI’s Board Memorandum for the 2024–25 amendment process  which noted that companies confined UPSI classifications to the events expressly enumerated under the PIT Regulations while failing to treat certain material events, which were disclosed under Regulation 30 of the LODR Regulations, as UPSI, which resulted in creating information asymmetry.

The amendment of 2018 replaced the term material events in the definition of UPSI in the past, after it was determined by the T.K. Viswanathan Committee that not all material events have a price-sensitive effect. This meant that firms followed a standard approach of reporting only the explicitly listed items as UPSI. This led to under-disclosure.

When comparing the Indian approach with those of the world, it can be seen that the Indian approach is shifting towards a more codified one. Similarly, the Regulation Fair Disclosure (RegFD) of the Securities and Exchange Commission in the United States has prohibited selective disclosure and consistent with judicial interpretation, requires the information to be accurate and capable of materially influencing prices, in turn, the European Union Market Abuse Regulation (MAR) places a tariff of selective disclosure on the basis of judicial interpretation such that information is required to be accurate and of a nature that could have a significant impact on prices. With the provision of an exhaustive list comprising sixteen events, SEBI aims at offering increased certainty, much along the lines established by recent enforcement cases wherein “grey areas” have been utilized as escape routes from liability.

5. Legal and Compliance Implications

The 2024-25 reform introduces an increased burden on listed businesses and insiders, which requires a substantial redesign of the internal disclosure procedures.

A) For listed companies and compliance officers:

Disclosure schedules now have to be synchronized by compliance officers. In case UPSI is introduced outside of the organisation, such as a regulatory notice, a 48-hour window provides companies with an opportunity to input such information in the Structured Digital Database (the “SDD”), from receipt to record details, a requirement that emanates from Regulation 3(5) and 3(6) of the SEBI (Prohibition of Insider Trading) Regulations, 2015.

The recent amendment to Schedule B, Clause 4 of the SEBI (Prohibition of Insider Trading) Regulations, 2015 brought about a minor but important change to the trading window mechanism. prior to the amendment, the trading window was generally closed as soon as any UPSI was received, not regarding whether the information came from an internal or external source. The revised framework, makes it clear that the trading window shall only be closed for UPSI that originates from within the listed company which is, internally generated price-sensitive information. As a result, trading window restrictions are not always required by the mere receipt of externally generated UPSI, such as judicial or regulatory actions, giving listed entities some operational flexibility.

B) For insiders and intermediaries:

The definition of UPSI has been broadened to allow the scope of liability appreciation. Fiduciaries such as Chartered Accountants and legal advisors should put in place a strong mechanism to ensure that information on newly added events, like forensic audits, does not leak out. The expansion of “connected persons” and “relatives” creates a better rebuttable presumption, and hence, the burden has been placed on insiders to prove that they never possessed the UPSI when engaging in the trade.

C) For investors and analysts:

The reason for these reforms is to ease access to material information, which helps to mitigate the degree of information asymmetry. By requiring that material events under LODR should be addressed as UPSI, SEBI has afforded ordinary investors with the institutional players on an equal playing field.

6. Critical Analysis and Open Questions

Even though the reforms strengthen the integrity of the market, it raises many concerns about the likelihood of “over-compliance”. The prescriptive character of the list may force corporations to categorize routine litigations or contract awards as UPSI, thus subjecting to disproportionately high administrative overheads and the smaller listed companies could find it difficult to maintain audit-ready SDD systems and timestamping on a wide spectrum of events.

 There is also a salient open question on how disclosure is being enforced for “self-generated” and “external” information. Although the 48-hour period applied by SEBI to outside UPSI is appreciated, how the former will balance its strict doctrine of possession with recent judicial cases that highlight the lack of motive or intent in high-volume trades is yet to be seen. In addition, it is unclear how SEBI will balance its rigid doctrine on possession with the recent court rulings that have stressed no motive or intent in small volume trades.

7. Conclusion

The 2024-25 reforms by SEBI represent a paradigm shift by combining the materiality parameter of the LODR Regulations with the prohibitive principle of the PIT Regulations. The regulator has succeeded in significantly reducing the grey areas that insiders would previously use to escape liability by expanding the definition of the UPSI into sixteen different types.

In the case of listed entities, the new reforms need to be prioritised within the framework of developing a proactive compliance culture and automating the management of SDDs to respond to the increased number of price-sensitive events. The future reform can additionally be seen to focus even more on the efficacy of these amendments, to the extent that the updated reform can promote the development of a transparent market environment where information parity will become the rule, not an exception.