SEBI Tightens Insider Trading Norms: Expanding The Scope Of Unpublished Price Sensitive Information

The Securities and Exchange Board of India (SEBI) has released a notification dated March 11, 2025, bringing in additional amendments to the SEBI (Prohibition of Insider Trading) Regulations, 2015.[1] These changes, set to be effective ninety days from their publication in the Official Gazette, represent a forward-looking initiative towards strengthening the regulatory structure against insider trading procedures. This article explores the most significant changes introduced by this amendment, examining their possible effects on market participants and the overall securities environment.

Broadening the Horizon of UPSI: A More Inclusive Definition

1. One of the fundamental parts of this amendment is the expansion of the definition of Unpublished Price Sensitive Information (UPSI), which has been made available under Regulation 2(1)(n) of the principal regulations. Whereas the current definition included information which, if disclosed, could substantially influence the price of listed securities, the new notification brings in a more detailed and expansive list of events which qualify as price-sensitive. These additions reflect SEBI’s intent to capture a wider spectrum of corporate developments that could be exploited by insiders for illicit gains.
2. The new phrasing under UPSI is diverse and strategically chosen. The addition of the “award or termination of order/contracts not in the normal course of business” addresses the possible price sensitivity of important, non-normal agreements. Similarly, the description of “change in key managerial personnel (excluding due to superannuation or end of term) and resignation of a Statutory Auditor or Secretarial Auditor” is due to acknowledging market response to change in leadership and auditor change, particularly if unforeseen.
3. Secondly, the amendment specifically refers to “change in rating(s), other than ESG rating(s),” “fund raising proposed to be undertaken,” and “agreements affecting the management or control of the company.” These references underscore the market’s sensitivity to changes in creditworthiness, intentions to raise capital, and adjustments to corporate governance structures.
4. The inclusion of financial distress-related events and legal proceedings is especially significant. “Fraud or defaults by the company, its promoters, directors, KMPs, or subsidiaries, and arrest of key personnel” specifically addresses the possibility of material adverse price impact and the ethical ramifications of insider awareness of such occurrences. Similarly, the clear reference to “resolution plan/restructuring or one-time settlement related to loans/borrowings” and “admission of winding-up petitions or corporate insolvency resolution process applications” also recognizes the significant effect of financial restructuring and insolvency proceedings on stock prices.
5. The amendment also broadens the definition to include procedural elements such as the “initiation of forensic audits and receipt of final forensic audit reports,” and “actions or orders by regulatory, statutory, enforcement, or judicial authorities against the company or its principal personnel.” These inclusions have the objective of restraining insider trading on the basis of information regarding incoming investigations or negative regulatory actions. The addition of the “outcome of material litigations or disputes,” “issuance of guarantees or indemnity or standing as a surety outside ordinary course of business,” and the “grant of key licenses or regulatory approvals and withdrawal, surrender, cancellation or suspension thereof” expands the realm of UPSI further to envelop a greater universe of potentially market-moving information.

Clarifications on Fraud, Default, and Materiality

For even greater clarity, the notice encompasses Explanations pertaining to UPSI. Explanation 1 settles the definitions of “Fraud” and “Default” through reference to already existing definitions under other SEBI regulations to have a uniform interpretation. Particularly, it connects “Fraud” to Regulation 2(1)(c) of the SEBI (Prohibition of Fraudulent and Unfair Trade Practices relating to Securities Market) Regulations, 1 2003, and “Default” to Clause 6 of paragraph A of Part A of Schedule III of the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.

Explanation 2 creates a direct connection between the identification of UPSI events and the guidelines of materiality as contained in Schedule III to the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. It clearly mentions that the guidelines of materiality mentioned in paragraph A and the notion of materiality in paragraph B of Part A of Schedule III to the LODR Regulations will be used for identifying the newly listed events as UPSI. This connection emphasizes the need to evaluate the potential effect of such events on security prices when defining them as UPSI, presenting a guideline for firms to assess the relevance of these events.

Adjustments to the Structured Digital Database

With the aim to further streamline management of information acquired outside, the amendment introduces a fresh proviso to Regulation 3 after sub-regulation (5) with regards to the Structured Digital Database (SDD). The exception extends the duration for placing such information “not originating within the organisation” in the SDD to within two calendar days of receipt. This acknowledges the truth of challenges involved in immediate acquisition of information externally, such as regulatory guidelines or judicial decisions passed down from elsewhere, without entirely deviating from emphasis on record keeping up-to-dateness in order not to enable exploitation. This relief provides a truer timeframe in which companies need to upload this sort of data onto their own databases.

Conditional Exemption from Trading Window Closure

Lastly, the amendment brings a substantial change regarding the closure of the trading window. A new proviso in Schedule B Clause 4 provides that the trading window “may not be closed for unpublished price sensitive information not emanating from within the Listed Company.” This exception acknowledges that information from outside sources, where insiders do not have undue influence or prior access, may not require a trading window closure to the same extent as internally generated UPSI. For example, a regulatory directive against the company, though certainly price-sensitive, has its origins beyond the company’s internal information system. Such conditional exemption would be able to improve trading liquidity for some information flows while retaining limitations on trading on the basis of internally sourced UPSI, balancing preventing insider trading with allowing market efficiency.

Conclusion

In summary, the 2025 amendment to the SEBI (Prohibition of Insider Trading) Regulations is an important development in strengthening the solidity of India’s insider trading regime. By broadening the definition of UPSI to include a broader set of potentially market-moving events, offering essential clarifications regarding the interpretation of critical terms and the application of materiality principles, and implementing subtle modifications to the SDD requirements and trading window closures, SEBI seeks to establish a more transparent and balanced securities market.

[1] https://www.sebi.gov.in/legal/regulations/mar-2025/securities-and-exchange-board-of-india-prohibition-of-insider-trading-amendment-regulations-2025_92645.html.

King Stubb & Kasiva,
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