COVID-19 and the subsequent lockdown has caused significant business disruptions and fueled huge distress in the global markets. As corporate India tries to adapt to the ‘new normal’, it is certain that our securities markets continue to battle old problems in a new garb.
Lockdown was imposed just before the end of the financial year coinciding with the period during which ‘price sensitive information’ related to financial results was in the process of being finalised. These dynamic circumstances pose a lucrative opportunity for ‘insiders’, who regularly have access to who regularly have access to information which is confidential or not public knowledge, which when disclosed to the public is likely to impact the price of the securities or shares. Such information is called as Unpublished Price Sensitive Information (“UPSI”), that may hold an even greater value now, than under normal circumstances.
A concern connected with the rise of COVID-19 has been the significant volatility in securities markets globally. In such a situation, insiders may have tremendous incentive and opportunity to trade on UPSI. At the same time given the depressed valuations, there has been a significant increase in the volume and amount of trading in equity shares.
As remote working has become more prevalent during the COVID-19 pandemic, the risks pertaining to leakage of UPSI have also increased in today’s environment due to various reasons as listed below:
Given the growing vulnerabilities to leakages of UPSI and insider trading violations, it is vital that organisations remain proactive in implementing necessary controls to prevent potential legal, financial and reputational implications.
( A version of this article appeared in The Economic Times on 05 September 2020 )