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KoreanSEBI PIT Regulation Amendment: Strengthening Insider Trading Norms
Introduction
The Securities Exchange Board of India (SEBI) vide its notification dated March 11, 2025 (published on March 12, 2025) introduced significant amendments to the SEBI (Prohibition of Insider Trading) Regulations, 2015 (SEBI PIT Regulations), by broadening the scope of unpublished price sensitive information (UPSI) and introducing flexibilities in relation to UPSI emanating from outside the listed entity (Amendments). In this update, we have provided a brief background, the key changes introduced by the Amendments to the SEBI PIT Regulations, and our thoughts on the same.
Brief Background
The Amendments are pursuant to SEBI’s consultation paper(s) dated 18 May 2023 (CP 2023) and 09 November 2024 (CP 2024). In the past on several occasions, SEBI had observed that an information/event which should have been categorised as UPSI was not done so by the listed entities and the judgment exercised by such listed entities in identifying and disclosing UPSI, as well as their adherence to the spirit of the law, was found to be inadequate. Consequently, the consultation papers proposed aligning the definition of UPSI under the SEBI PIT Regulations with the material events specified under the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (LODR Regulations).
The CP 2023 had proposed to include all material events outlined under Regulation 30 of the LODR Regulations within the definition of UPSI. Taking into account the feedback received from stakeholders on CP 2023, SEBI, in CP 2024, further refined the proposal to include only those events under Regulation 30 that are likely to impact the price of securities, within the scope of UPSI.
Key Amendments
The following are the key Amendments introduced to the SEBI PIT Regulations:
- Broadening the definition of UPSI
The definition of UPSI provides an illustrative list of events / information of what may ordinarily constitute UPSI because of their potential to materially affect the price of the securities.
The following are the key events added to the definition of UPSI under SEBI PIT Regulations by the Amendment:
- Any decision regarding fund raising proposed to be undertaken;
- Any agreements, by whatever name called, which may impact the management or control of the company;
- Initiation of forensic audit, by whatever name called, by the company or any other entity for detecting misstatement in financials, misappropriation/ siphoning or diversion of funds and receipt of final forensic audit report;
- Giving guarantees or indemnity or becoming a surety, by whatever name called, for any third party, by the company not in the normal course of business;
- Granting, withdrawal, surrender, cancellation or suspension of key licenses or regulatory approvals;
- Admission of winding-up petition filed by any party / creditors and admission of application by the Tribunal filed by the corporate or financial creditors for initiation of corporate insolvency resolution process (CIRP) against the applicant company as a corporate debtor, approval of resolution plan or rejection thereof under the Insolvency and Bankruptcy Code, 2016; and
- Litigation:
- Outcome of litigation/disputes with a potential business impact on the listed company; and
- Action(s) initiated or orders passed within India or abroad, by any regulatory, statutory, enforcement authority or judicial body against the company or its directors, key managerial personnel, promoter or subsidiary, in relation to the company.
For the purpose of identifying the events listed above as UPSI, the principles of materiality specified in Paragraph A of Part A of Schedule III of the LODR Regulations, as may be amended or specified by SEBI from time to time, along with the materiality criteria set out in Paragraph B of the same Schedule, shall be applicable.
- Easier norms for information emanating from outside the listed entity
The Amendments also introduce flexibility in relation to entry of information into the structural digital database (SDD) maintained by listed entities under SEBI PIT Regulations. Accordingly, for information emanating from outside the company, the listed entities must enter the details in the SDD within 2 days of the receipt of information.
The Amendments also stipulate that for UPSI originating from outside the listed entity, the trading window for designated persons and their immediate relatives will no longer required to be closed.
Our Thoughts
The Amendments broaden the ambit of UPSI, and will play a significant role in curbing insider trading violations. Additionally, the flexibility in relation to UPSI originating from external sources strikes a balance between transparency and efficient market functioning. Overall, while these changes enhance market integrity, they also increase compliance requirements for listed entities, emphasizing the need for more robust measures in preventing insider trading.
The Amendments will be effective from 10 June 2025 and can be accessed here.
The information contained in this document is not legal advice or legal opinion. The contents recorded in the said document are for informational purposes only and should not be used for commercial purposes. Acuity Law LLP disclaims all liability to any person for any loss or damage caused by errors or omissions, whether arising from negligence, accident, or any other cause.
