Redefining UPSI: The 2025 Insider Trading Amendment’s Wider Net and Its Corporate Governance Fallout

[Vedansh is a student at Rajiv Gandhi National University of Law.]

The Securities and Exchange Board of India (SEBI) introduced crucial amendments to the SEBI (Prohibition of Insider Trading) Regulations 2015 (PIT Regulations) in March 2025. These amendments will come into force on 9 June 2025. These amendments to the PIT Regulations mark a steady improvement in the laws governing the security market practices. They are expected to reform and bring a paradigm shift in the understanding and operationalizing of the unpublished price sensitive information (UPSI). UPSI is defined under Regulation 2(1)(n) of the PIT Regulations as information which, upon becoming generally available, is likely to materially affect the price of the concerned securities.

The primary focus of this amendment is to ensure more transparency and accountability, and deal more accurately in curbing such issues. However, these amendments open a Pandora’s box and create new challenges in corporate governance and compliance. This blog critically analyzes the 2025 amendment, with emphasis on the meaning of UPSI, the implications on corporate governance, potential enforcement issues and comparative insights from foreign jurisdictions. This blog argues that while this recent amendment focuses on amending and refining the rules governing insider trading in India, it has simultaneously introduced complexity and discretion that necessitate institutional recalibration.

Reconfiguring UPSI: Legislative Intent and Interpretive Shift

The major change, introduced by the 2025 amendment, deals with the broad interpretation and fundamental alteration to the concept of UPSI. Before this amendment, UPSI was defined as information that can materially affect the security price, i.e., any information that directly or substantially affects the price of the security in the market. The Indian courts have recognized this test in the case of IPO of Onelife Capital Advisors Limited. Now, after the recent amendment, the meaning of UPSI will contain termination of key contracts, changes in credit ratings (except ESG ratings), material fraud or defaults by promoters, arrests of key managerial personnel (KMPs), and significant litigation outcomes.

This expansion in the meaning of UPSI signifies a shift from the prior principal-based model to a semi-rule-based framework, thus, this will affect the amount of discretion available to the listed companies. This approach will prompt them to check and possibly change the reporting levels for each event. It aims to cover (such events), the grey areas that insiders historically claim as non-material and ambiguous when issues of UPSI were raised. However, SEBI must be applauded for bringing such clarity in identifying the material events. Yet this leads us to the simultaneous questions regarding how much territory it covers and the possible dilution of the materiality doctrine. Will investors understand more, or will they be merely inundated with data of marginal relevance?

The Compliance Overhaul: Digital Record-Keeping and Real-Time Disclosure

The recent amendment mandates that listed companies must strictly adhere to the compliance framework. Under the 2018 amendment to the PIT Regulation 3(5), listed companies are required to maintain a structured digital database (SDD) to record any UPSI provided by external sources, excluding those that are generated internally. The recent amendment requires the listed companies to record such information in the SDD, within 2 calendar days from the date of their knowledge. Such requirements reflect an unprecedented emphasis on contemporaneity and traceability.

For listed companies, such compliance would mean substantial technological and managerial adaptation. They are required to make large changes and a fundamental shift from the traditional compliance system. After the implementation of the recent amendments, the listed companies are required to integrate real-time data tracking, audit trails, and foster departmental communication protocols to identify, verify, and record UPSI. The management of the digital information under the new regime will no longer be a traditional clerical function but a vital regulatory defence.

Thus, these measures will surely increase the burden on the compliance officers (defined under Regulation 2(c) of the PIT Regulations), who are responsible for ensuring conformity with all applicable regulations and directives. Now, they will be responsible for discerning the source of information, verifying its materiality, and recording it in a manner that stands the scrutiny of regulatory audits. The lack of clear guidance on what constitutes “receipt” of UPSI under the amendment to Section 2(5) lays down irregular compliance standards and inadvertent violations.

Trading Window Adjustments: Recalibrating Internal Controls

A subtle but impactful change in the recent amendment to Schedule B, Clause 4, is regarding the modification in the trading window rules. Before, the trading window was immediately closed upon the receipt of any UPSI, regardless of its source. But, after this amendment, only UPSI originating from the listed company (internal information) can result in the restriction of the trading window.

Despite mitigating the operational strain on the regular suspensions of the trading windows, this amendment has further alleviated it by necessitating a granular understanding of the provenance of information. Determining whether the information was generated internally by the listed company or generated by an external source is a challenge and not straightforward in complex corporate environments. The primary reason is the involvement of numerous stakeholders, consultants and intermediaries in the listed company’s operations.

As a result, listed companies are encouraged to implement sophisticated internal policies within their organizations to identify the origin of UPSI, along with legal audits and data governance protocols. The listed companies, with the absence of source-determination mechanisms, not only face challenges in compliance with the new amendment but also expose such listed companies to regulatory liability.

Comparative Jurisprudence: Contrasts and Convergences

A comparative analysis demonstrates that India’s approach is moving towards a more codified system when compared to foreign securities markets. Thus, it is imperative to analyze India’s evolving jurisprudence in a broader comparative context.

United States

In jurisdictions like the United States, the insider trading regulations are predominantly grounded in a principle-based, judicially evolved framework. The Securities Exchange Commission’s Rule 10b-5 under the Securities Exchange Act of 1934 demonstrates such a principle-based approach. The US framework forbids deceptive activities involving securities transactions, leaving the determination of materiality to judicial interpretation. This approach is different from the jurisdictions which codify the specific type of information that constitutes UPSI. The case of TSC Industries, Inc. v. Northway, Inc. introduced a flexible standard, which is to determine whether a ‘reasonable investor’ would consider such information crucial while making an investment decision. Thus, the American jurisprudence follows an approach which embraces a broad and adaptive understanding of insider information and allows court intervention in determining the materiality of the information based on recent changes in the market.

European Union

The European Union, under Article 7 of the Market Abuse Regulation (MAR), adopts a slightly more defined approach but with considerable room for interpretative flexibility. The inside information provided within the meaning of MAR must be ‘precise’, not publicly known, and capable of significantly affecting the prices of financial instruments. These three criteria provide a structured yet adaptable approach to organize and evaluate insider information by the listed company. The purpose of the EU’s functional standard is to reinforce market integrity and adapt accordingly to the new changes in the financial ecosystems.

United Kingdom

In the United Kingdom, the Financial Conduct Authority (FCA) adopted a principles-based approach similar to the EU-MAR Regulation to safeguard investors and market efficiency. The FCA’s Handbook (Disclosure Guidance and Transparency Rules sourcebook) defines inside information in terms of the material impact of such information on the reasonable investor’s choices. Thus, the UK jurisprudence highlights the importance of the context and investor perception in determining such information, rather than having over-codification.

Position in India

In contrast to other jurisdictions, India is taking a step toward enumeration and codification, which is evidenced by the 2025 UPSI amendment. The amendment broadens the meaning of UPSI by prescribing the list of events and categories that are deemed sensitive per se. Therefore, these do not include traditional financial disclosures but also include the strategic and operational decisions like mergers, regulatory actions, and even changes in key managerial personnel.

However, this shift to codification leads to rigidity and makes it tough for the regulators to adapt to novel forms of market abuse. The prescriptive model may risk the current regime and deter proactive compliance. Where global markets rely on a model based upon interpretive discretion and case-by-case adjudication, India’s preference for black-letter rules may undermine the objective of a nuanced and context-sensitive regulatory ecosystem. More critically, the over-expansion of what constitutes UPSI may dilute the doctrine’s functional purpose.

From a comparative standpoint, India’s current situation mirrors Japan’s initial attempts in the 1990s to codify the insider trading norms, which, after much criticism, resulted in adopting a fundamental approach. Similarly, South Korea have ultimately adopted a balanced regime that anchors detailed guidance in a broader, principles-based legal framework after changing its approach several times.

The Way Forward

In May 2025, the IndusInd Bank case highlights the relevance of these amendments. In this case, the officials allegedly engaged in the sale of ESOP shares while being in possession of information concerning internal accounting discrepancies. It underscores the challenge of detecting and deterring trading based on non-public operational anomalies. Under the new framework, any discrepancies caused by fraudulent acts or default by KMPs would be considered UPSI. However, it also reiterates the importance of internal reporting systems to ensure such information is spotted quickly.

Corporate governance implications: A shift in responsibility

The amendments cause a major shift in corporate governance. Now, the board of directors, compliance committees and audit panels are expected to play an active role in interpreting, monitoring and disclosing UPSI. Furthermore, the role of the Company Secretary and Chief Compliance Officer is now more strategic than administrative. This transformation calls for capacity-building across the board. Listed companies must enhance compliance literacy, conduct mock audits and engage legal advisors for policy updates. The disclosure practices need to follow a risk-based framework rather than just being a task without applying logic. Listed companies might face the challenge of over-disclosure, so they may need to strike a balance to avoid noise without compromising transparency.

Towards a transparent but practicable regulatory future

The 2025 amendments signify a forward-looking regulatory vision. SEBI has shown its firm commitment to regulate the financial market and ensure investor confidence by redefining UPSI, enhancing digital compliance and narrowing trading window closures. However, the road ahead is not without complications; the risk of compliance fatigue, interpretive ambiguity, and uncertainty in enforcement are some of the major issues. To combat them, SEBI must consider issuing supplementary guidance notes and changing sector-specific disclosure protocols. Dynamic feedback from stakeholders could further aid in regulatory fine-tuning.

In terms of comparative jurisprudence, SEBI could consider instituting a hybrid regime to optimize the Indian model. This suggests retaining the codified list of UPSI categories, but supplementing it with a general materiality clause akin to the US standard. With such provisions, regulators and courts assess price-sensitive information based on market context, investor behaviour, and evolving corporate disclosures. Moreover, this will align the Indian framework with the global regulatory cooperation, ultimately improving investor confidence and enhancing market integration.

In conclusion, while the 2025 amendment reflects a commendable effort to bring definitional certainty to the insider training framework, its efficiency hinges on whether SEBI can balance clarity and adaptability. The success of these reforms lies in balancing doctrinal clarity with operational practicality; therefore, India should develop its future framework with clarity and be responsive to the complexities of the dynamic security market.