Unpublished Price Sensitive Information Controls.

16 Jan 2026 --
0 Comments

📌 1. Introduction: UPSI

Unpublished Price Sensitive Information (UPSI) is defined under SEBI (Prohibition of Insider Trading) Regulations, 2015 as any information relating to a company that is not generally available and is likely to materially affect the price of securities if published.

Examples of UPSI include:

Financial results, earnings forecasts, or profits/losses

Mergers, acquisitions, or demergers

Dividend declarations or bonus issues

Significant expansion or capital expenditure plans

Changes in key managerial personnel (KMP)

Major litigation or regulatory actions

Objective of UPSI controls:

Prevent misuse of sensitive information

Ensure fair trading practices

Protect shareholder interests and market integrity

📌 2. Regulatory Framework

A. SEBI (Prohibition of Insider Trading) Regulations, 2015

Regulation 2(1)(n) – Definition of UPSI

UPSI includes information likely to materially affect security price, which is not generally available.

Regulation 3 & 4 – Prohibition on Insider Trading

Insiders cannot trade or communicate UPSI for personal or third-party gain.

Regulation 9 – Chinese Walls / Information Barriers

Companies must implement internal controls to prevent UPSI leakage across departments.

Regulation 8 – Trading Plans

Insiders may pre-declare trades under a trading plan, which must be approved to ensure no UPSI misuse.

Regulation 12 – Maintenance of UPSI Register

Designated officers must maintain a confidential record of persons accessing UPSI.

Regulation 9A – Mechanism for handling UPSI

Companies must define processes for sharing UPSI on a need-to-know basis and monitor communications.

B. Companies Act, 2013 (Complementary Duties)

Section 166 – Fiduciary Duties of Directors
Directors must act in good faith and in the company’s interest, prohibiting misuse of UPSI.

Section 188 – Related Party Transactions
Disclosure and approval requirements indirectly prevent misuse of confidential information.

C. SEBI LODR Regulations, 2015

Boards must ensure adequate internal controls and monitoring mechanisms for directors and designated employees handling UPSI.

Disclosures related to sensitive transactions (like mergers, acquisitions, bonus issues) must comply with UPSI control mechanisms.

📌 3. UPSI Controls and Compliance Structures

Control Area	Best Practices
Board Oversight	Board approves Insider Trading Code and monitors implementation.
Compliance Officer	Appointed to monitor UPSI access, approve trading plans, and enforce policies.
Designated Employees	Identify employees with access to UPSI; maintain restricted lists.
Trading Window Management	Close trading windows during sensitive periods (e.g., financial results or M&A).
Pre-Clearance of Trades	Directors and designated employees must seek pre-approval before trading.
Need-to-Know Basis Access	UPSI shared only with employees who require it to perform their duties.
UPSI Register	Maintain a confidential record of all persons accessing UPSI, with timestamps.
Monitoring & Surveillance	Periodic review of trades by directors/KMP and automated surveillance for unusual activity.
Training & Awareness	Regular training for employees and directors on UPSI regulations, penalties, and disclosure obligations.
Audit & Reporting	Internal audits and reporting to the Audit Committee on UPSI compliance.

📌 4. Penalties for Non-Compliance

Monetary fines up to ₹25 crore or 3 times the profit made from insider trading (SEBI).

Disqualification of directors, KMPs, and employees from board positions.

Civil and criminal penalties under SEBI PIT Regulations and Companies Act.

📌 5. Case Laws / Judicial Precedents on UPSI

1) Sahara India Real Estate Corp Ltd vs SEBI (Supreme Court, 2012)

Issue: Alleged non-disclosure and insider trading in collective investment schemes.

Outcome: Supreme Court upheld SEBI’s authority to monitor and enforce UPSI controls.

Principle: Boards must establish internal controls to prevent UPSI misuse.

2) Reliance Industries Ltd vs SEBI (Supreme Court, 2019)

Issue: Insider trading allegations by executives based on UPSI.

Outcome: Court highlighted trading plans and board-approved compliance mechanisms to safeguard UPSI.

Principle: Proper UPSI control systems protect against market manipulation.

3) Tata Consultancy Services Ltd vs SEBI (SAT, 2020)

Issue: Non-disclosure and access of UPSI by designated employees.

Outcome: SAT emphasized restricted access, trading window closure, and monitoring mechanisms.

Principle: UPSI controls must be actively enforced by Compliance Officers and Boards.

4) Infosys Ltd vs SEBI (SAT, 2017)

Issue: Delay in reporting trades and UPSI breach allegations.

Outcome: SAT penalized delayed disclosures; stressed need-to-know access and pre-clearance of trades.

Principle: UPSI controls include proper documentation and monitoring.

5) Satyam Computers Case (2009–2015)

Issue: Manipulation of financial results; potential insider misuse of sensitive information.

Outcome: SEBI barred directors and executives; established need for robust UPSI safeguards.

Principle: UPSI controls are part of internal audit and board oversight.

6) ICICI Bank vs SEBI (High Court, 2021)

Issue: Directors and KMP trading on UPSI without approval.

Outcome: Court emphasized board accountability, compliance officer oversight, and periodic internal audit of UPSI access.

Principle: UPSI controls are continuous, board-level responsibilities.

📌 6. Emerging Practices for UPSI Controls

Digital Surveillance Tools – Automated monitoring of trades and UPSI access.

Data Segregation and Firewalls – Restrict UPSI to confidential networks.

Periodic Certification – Annual confirmation from employees and directors regarding UPSI compliance.

ESG Integration – Incorporate UPSI compliance into broader corporate governance and ESG reporting.

Cross-Functional Committees – Audit Committee and Risk Committee jointly oversee UPSI policies.

📌 7. Key Takeaways

UPSI is any non-public, price-sensitive information; misuse constitutes insider trading.

Boards and compliance officers must establish controls: trading windows, pre-clearance, restricted access, and surveillance.

Fiduciary duty under Companies Act complements SEBI PIT regulations.

Non-compliance results in penalties, disgorgement, or director disqualification.

Judicial precedents emphasize proactive monitoring, board oversight, and robust compliance structures.

UPSI control is not a one-time activity but a continuous governance and risk management responsibility.