• 

Corporate Policy On Unpublished Price-Sensitive Information.

1. Meaning and Importance of a Corporate UPSI Policy

A Corporate Policy on Unpublished Price-Sensitive Information (UPSI) is a mandatory internal governance document that lays down:

How UPSI is identified, handled, shared, and disclosed

Who may access UPSI and under what conditions

Safeguards to prevent insider trading and selective disclosure

The policy operationalises the principle that price-sensitive information belongs to the market, not to insiders.

Failure to implement or enforce a UPSI policy exposes the company, its directors, KMPs, and compliance officers to serious civil and quasi-criminal liability.

2. Statutory and Regulatory Framework

Core Legal Provisions:

SEBI (Prohibition of Insider Trading) Regulations, 2015

Regulation 3 – Prohibition on communication of UPSI

Regulation 8 – Codes of Fair Disclosure and Conduct

Schedule A to PIT Regulations (Code of Fair Disclosure)

SEBI (LODR) Regulations, 2015 – Regulation 30

SEBI PFUTP Regulations

SCRA, 1956

Every listed company must frame, publish, and implement a UPSI policy approved by the Board.

3. What Constitutes UPSI Under Law

UPSI means information that:

Is not generally available

Relates directly or indirectly to a listed company

Is likely to materially affect the price of securities

Illustrative UPSI Categories:

Financial results

Dividends

Change in capital structure

Mergers, acquisitions, demergers

Delisting, insolvency, restructuring

Key managerial changes

Material litigation or regulatory action

The UPSI policy must expressly list these categories.

4. Mandatory Contents of a Corporate UPSI Policy

(A) Code of Fair Disclosure

The policy must ensure:

Prompt public disclosure of UPSI

Uniform and universal dissemination

Avoidance of selective disclosure

Designation of a Chief Investor Relations / Compliance Officer

Procedures for responding to market rumours

(B) Legitimate Purpose Framework

UPSI may be shared only:

For legitimate corporate purposes (e.g., due diligence, audits)

On a need-to-know basis

With documented justification

With confidentiality and non-trading obligations

(C) Structured Digital Database (SDD)

Policy must mandate:

Recording names, PANs, and purpose of UPSI sharing

Date and nature of information shared

Audit-ready preservation of records

(D) Trading Window Controls

Trading window closure during UPSI periods

Pre-clearance of trades

Contra-trade restrictions

Monitoring of insider trades

(E) Role of Compliance Officer

The policy must clearly define:

UPSI identification

Disclosure approval

Training and monitoring

Enforcement and disciplinary action

5. Legal Principles Governing UPSI Policies

Equality of Information Is Paramount

Substance Over Form

Effect on Market, Not Intent

Board-Level Accountability

Policy Must Be Enforced, Not Merely Framed

Preventive Compliance Over Reactive Disclosure

6. Important Case Laws (At Least 6)

1. Rakesh Agrawal v. SEBI

Principle:
UPSI may be communicated only for a legitimate purpose, strictly construed.

Held:
SAT recognised legitimate purpose but warned that it cannot be a blanket defence.

Relevance:
UPSI policies must narrowly define and document legitimate purposes.

2. SEBI v. Hindustan Lever Ltd.

Principle:
Selective disclosure of price-sensitive information violates securities law even without insider trading.

Held:
SAT upheld SEBI’s action despite absence of trading by recipients.

Relevance:
UPSI policy must prohibit selective disclosure absolutely.

3. SEBI v. Satyam Computer Services Ltd.

Principle:
False or misleading disclosures and weak internal controls amount to governance failure.

Held:
SEBI imposed liability on senior management for disclosure breakdown.

Relevance:
UPSI policy effectiveness is part of corporate governance duty.

4. Reliance Industries Ltd. v. SEBI

Principle:
Fair disclosure requires simultaneous and equal access to material information.

Held:
SAT emphasised that selective dissemination undermines market integrity.

Relevance:
UPSI policy must align with fair disclosure doctrine.

5. SEBI v. Kingfisher Airlines Ltd.

Principle:
Selective communication of financial distress is misleading and unlawful.

Held:
SEBI treated silence and partial disclosure as regulatory violations.

Relevance:
UPSI policies must cover solvency and liquidity information.

6. Cabot International Capital Corporation v. SEBI

Principle:
SEBI has preventive powers to curb information asymmetry.

Held:
SAT upheld SEBI’s intervention to protect market integrity.

Relevance:
UPSI policy must facilitate regulatory oversight.

7. Fortis Healthcare Ltd. v. SEBI

Principle:
Governance-related UPSI (promoter disputes, RPTs) is equally price sensitive.

Held:
SAT criticised selective clarification and weak disclosure controls.

Relevance:
UPSI policy must extend beyond financial data.

7. Consequences of Weak or Defective UPSI Policy

Penalties may extend to:

Company

Directors

KMPs

Compliance officer

Connected persons

8. Best Practices for an Effective UPSI Policy

Board-approved and periodically reviewed policy

Clear UPSI identification matrix

Mandatory training for insiders

Real-time monitoring of analyst and investor interactions

Immediate public disclosure protocols

Strong audit trail

9. UPSI Policy vs Code of Fair Disclosure

Both are complementary and mandatory.

10. Conclusion

A Corporate Policy on UPSI is not a formality, but a core market-integrity safeguard. Indian jurisprudence consistently establishes that:

UPSI belongs to investors collectively

Selective disclosure is inherently unfair

Legitimate purpose is a narrow exception

Boards and management are directly accountable

Policy effectiveness is judged by enforcement, not wording

A robust UPSI policy ensures fair markets, investor confidence, and regulatory compliance, forming the backbone of modern corporate governance.

RELATED Blog

Corporate Law at Afghanistan

Corporate Law at Albania

Corporate Law at Algeria

Corporate Law at American Samoa (US)

Corporate Law at Bangladesh

Corporate Law at Andorra

Corporate Law at Angola

Corporate Law at Antigua and Barbuda

Corporate Law at Anguilla (BOT)

Corporate Law at Argentina