Reshaping UPSI Compliance for Listed Companies

An article titled “Reshaping UPSI Compliance for Listed Companies” co-authored by our Partner, Abhiraj Arora and Associate, Piyush Kaushal, has been published by BW Legal.

The Securities Appellate Tribunal (SAT) order in the Reliance Industries v. SEBI case is set to fundamentally alter compliances related to Unpublished Price Sensitive Information (UPSI) for all listed Indian companies. The order reshapes how companies must manage UPSI, pushing the compliance timeline back to the earliest stages of business discussions. This judgment overturns the established understanding of when UPSI is created, posing immediate and complex challenges for compliance teams.

Facts of the Case

In June 2022, SEBI penalized Reliance Industries Limited (RIL) and two compliance officers for failing to promptly disclose information about investment by Facebook Incorporation (Facebook) in Jio Platforms Limited (JPL), an RIL subsidiary. A summary of events that culminated in the issuance of the SEBI order is provided below.

SEBI penalized RIL for violating SEBI (Prohibition of Insider Trading) Regulations, 2015 (PIT Regulations) and SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (LODR Regulations), citing the company’s failure to clarify media reports regarding the deal. Subsequently, RIL preferred an appeal against the SEBI order before SAT.

SAT dismissed RIL’s appeal on May 2, 2025 (SAT Order), upholding SEBI’s finding that RIL failed to promptly disclose information that became public through media reports, deeming these reports to be selectively disclosed UPSI.

This article discusses how the SAT Order appears to contradict previously established regulatory positions, potentially creating a more complex and burdensome compliance environment.

Beyond Routine: NDAs as New UPSI Triggers

The SAT Order has established a new, earlier trigger point for UPSI. It held that information becomes ‘credible’ merely upon the signing of an NDA, and ‘concrete’ upon the execution of a non-binding term sheet. This is a departure from established regulatory principles. Previously, SEBI itself had rejected the idea that an NDA automatically triggers the start of UPSI period.

In the Order in the matter of trading in the shares of Palred Technologies Limited dated August 13, 2019, the regulator noted that NDAs are primarily for facilitating and conducting due diligence and the signing of an NDA does not signify that a deal is clinched, as it could be scrapped anytime during the diligence process. In Order in respect of Mr. Shreehas P Tambe in the matter of Biocon Ltd dated June 30, 2021, SEBI held that at the stage where parties have merely opened discussions, the nature of engagement is exploratory and the probability of the transaction materialising is low. Discussions during the UPSI period have a reasonable probability of the transaction going through.

Conflicting Disclosure Standards and the Compliance Dilemma

The SAT Order held that PIT Regulations set a higher bar for disclosure, meaning information can be considered UPSI even if it is not deemed ‘material’ for disclosure under LODR Regulations. Hence, an event which is not material under LODR Regulations (i.e., signing of NDA) may be considered as UPSI under PIT Regulations. However, the same SAT Order stated that what is ‘price sensitive’ is essentially ‘material’, but the converse is not true. This creates significant regulatory uncertainty, as the order itself appears to contain conflicting views.

SEBI argued before SAT that the stringent requirements under PIT Regulations cannot be diluted or ignored by referring to requirements under LODR Regulations, and in the case at hand, the signing of NDA was correctly deemed to be the start of UPSI period. SEBI’s argument before the SAT stands in contrast to its own prior regulatory guidance. The Industry Standards Note (ISN) on verification of market rumours, prepared in consultation with SEBI, states that signing an NDA falls under the preparatory stage of a transaction and at this preparatory stage, a company is generally required to state in its disclosure that there is “no material event/ information that requires disclosure under Regulation 30.” It is also important to highlight that the FAQs issued by National Stock Exchange of India Limited (NSE) on Structured Digital Database (SDD) in 2022 notes that sharing of UPSI is the trigger for recording it in SDD; and that UPSI is said to germinate when the probability of going ahead with the information/ event is higher than not going ahead and such information/ event is likely to materially affect the prices of the securities of the company when published. Clearly, the established position of both SEBI and the NSE was that signing an NDA is an exploratory step and does not, by itself, become a UPSI event.

Thus, an event which is not even considered material by SEBI was argued and upheld to be a UPSI event. Note that under the ISN read with LODR Regulations, only the top 250 listed companies are required to verify market rumours, provided that the rumour was published in mainstream media and had a material price movement. However, every listed company is required to authenticate information leaked to news agencies under the PIT Regulations.

The Road Ahead for Compliance Officers

Following the SAT Order, the compliance landscape has been redrawn. Routine preliminary steps, such as signing an NDA, now risk triggering UPSI obligations. This includes maintaining structured digital databases, implementing trading restrictions for designated persons, and monitoring all related communications months before a deal materializes, if it ever does.

Compliance officers now face the unenviable task of determining when exploratory discussions become “credible” enough to trigger disclosure obligations, all while operating without clear regulatory guidance. This expanded scope has immediate practical consequences: trading windows will close earlier and for longer, media monitoring must begin at the first point of contact, and compliance teams must now track potential UPSI from the moment of inception. Ultimately, the SAT Order places the onus squarely on compliance officers to navigate a landscape where regulatory expectations are not only stricter but also less certain than ever before.