(UPSI) Unpublished Price Sensitive Information: Analysing the Scope of Regulation 2(n) of SEBI

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Unpublished Price Sensitive Information (UPSI)

Written by Amrita Sony


Gordon Gekko famously said in the 1987 film Wall Street, “The most valuable commodity I know is information.” Insider Trading, often known as insider dealing, can be defined as trading in securities of a company to profit in the short or long term based on material knowledge that is not available to the general public. Such confidential information is nothing but unpublished price sensitive information.

Unpublished Price Sensitive Information (“UPSI”) contains non-public data that, if made public, would have a substantial impact on a company’s stock performance. UPSI is defined in Regulation 2(1)(n) of the Securities Exchange Board of India (Prohibition of Insider Trading) Regulations, 2015 (“PIT Regulations”) as “financial results, dividends, change in capital structure, mergers, de-mergers, acquisitions, delistings, disposals and expansion of business, change in key managerial personnel and such other transactions.” Any information, directly or indirectly, relating to a firm or its shares that are not publicly known and that, when made widely available, is likely to materially affect the price of the securities is UPSI.

India’s insider trading regime has rapidly evolved as a result of legislative modifications and judicial rulings, resulting in one of the strongest insider trading prohibitions in the world. Persons dealing while in possession of UPSI are presumed to have engaged in insider stock trading under the PTI Regulations.

What Constitutes UPSI?

Knowledge and Preponderance of Probabilities

In one of the most famous cases i.e., WhatsApp Leak Case, the Securities Appellate Tribunal (“SAT”) held that information is regarded UPSI only if the person receiving it was aware that it was a UPSI. Prior to their official stock exchange announcements, UPSI was distributed in private WhatsApp groups regarding firms like Bajaj Auto, Bata India, Ambuja Cements, Asian Paints, Wipro, and Mindtree. SEBI ordered an investigation and directed search and seizure operations for 26 Market Chatter WhatsApp Business groups, taking over 190 devices, papers, and other evidence.

The regulator punished Shruti Vishal Vora and numerous others for leaking UPSI-related financial information of the six companies over WhatsApp before they were formally released. The accused claimed that it is a prevalent practice among traders, market analysts, institutional investors, and others, in which unverified gossip are frequently shared and generally known as market speculation/rumours. The accused filed an SAT petition in response to SEBI’s directives, claiming that the data mined by the regulator from the devices would demonstrate that none of the appellants were the information’ originators, but that they had simply passed on the messages obtained from other sources.

SAT held that SEBI was unable to show that the disputed messages were UPSI, that the appellants understood it was UPSI, and that they or any of them had communicated the information to third parties with that knowledge on a balance of probabilities. Therefore, for any information to be regarded as UPSI, firstly, the individual receiving the information must be aware that it is unpublished or unavailable publicly. Secondly, a preponderance of probabilities must be established.

UPSI will be still UPSI regardless of the source of the leak

Shruti Vishal Vora contended that they were only information conduits. The source of the “leak’s” original tipper had remained unknown. The UPSI Transferors stated that the disputed material could not be classed as UPSI because the originator’s identity and any facts about its relationship with the entities in question were missing. To this argument, SEBI strongly opposed ruling that UPSI’s character is derived from what it is (content) rather than who spilt the beans. As a result, any information that meets the PIT Regulations’ criteria, i.e., information that has the potential to materially alter the price of stocks when made widely available, is UPSI. Notably, UPSI is tipper-agnostic, as evidenced by the updated definition of “insider” in PIT 2015, which now includes both connected people and anyone with access to UPSI.

Price Sensitivity

Any unpublished information which even if does not have the capacity to affect the stock performance of a company can be considered as UPSI. Therefore, trading made on relying on such information cannot be considered insider trading. Regulation 2(k) of under Securities Exchange Board of India Prohibition of Insider Trading Regulation, 1992 (“1992 Regulation”) highlights two types of data that may be price sensitive. The first is concerned with the elements specified in (i) to (viii), while the other is concerned with other information that is “of importance, directly or indirectly, to a company and is not widely recognized or publicized for general knowledge by such corporation.”

In Hindustan Lever Limited v. SEBI[1] one of the issues was whether the information held by Hindustan Lever Limited (“HLL”) constituted UPSI. The SAT concurred with the SEBI Order that the information available to HLL in connection with the merger went outside self-generated information, that is, information produced from the company’s own decision-making processes. To be considered UPSI, information must meet the dual conditions outlined in Regulation 2(k) of the 1992 Regulations.

The Appellate Authority further determined that material that is well known does not need the corporation to review or authenticate it because it would otherwise be regarded as “published by the company.” It agreed with SEBI that merger-related information was price sensitive (but not ‘unpublished’). Following the decision, SEBI also added a new provision, Regulation 2(ha) under the 1992 Regulation that defined “price-sensitive information” as any information relating to an amalgamation, merger, or takeover, regardless of whether such data has an impact on the market price of stocks.

Recently, in January 2022 SEBI has barred Mehul Choski and Rakesh Girdharlal Gajera from the capital markets for one year for violating insider trading rules in the matter of Gitanjali Gems Ltd. (“GGL”). The UPSI as identified by SEBI in this case was the false Letters of Undertaking (“LOUs”) issued on behalf of Gitanjali Group, including GGL. PNB conducted a preliminary investigation into the issuing of fraudulent LOUs. According to the inquiry, buyers’ credit was manipulated by enhancing new purchasers’ credit against false LOUs.

As a result, some of the buyers’ credit was rolled over several times. Mr Gokulnath Shetty, the Deputy Manager, who retired from PNB on May 31, 2017, authorised the illegal transactions. He aided the Gitanjali Group in the issue and rollover of these fake LOUs amounting to 280.70 crores suspected fraud.  The bogus LOUs were due to expire in February 2018, and the Gitanjali Group would be required to repay the money.   The information of the fraudulent LOUs issued by Gitanjali Group being public was price sensitive information linked to GGL.


The recent developments in capital markets show that any sort of malpractice that curtails the trust of genuine investors in the market would not be accepted by SEBI. It is time for companies to pay close attention to the trading in their securities by their promoters, workers, or anybody else associated with the company, and to ensure that such trading does not violate any of the current SEBI laws. Companies must take steps to ensure that anyone who has or is suspected of having unpublished price sensitive information does not share it unless it is for a lawful reason.

About the Author

Amrita Sony

Amrita Sony

4th-year B.Com., LL.B. (Hons.) student at Gujarat National Law University in Gandhinagar, Gujarat.

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