A notice of confidentiality is required to be given to UPSI recipients per Reg. 3(2B) of the relevant regulations, how do we do that?
In India, for example, regulation 3(2B) of the SEBI (Prohibition of Insider Trading) Regulations, 2015, in force since 1 April 2019, treats any person who receives unpublished price sensitive information for a legitimate purpose as an insider, and requires due notice to be given to that person to maintain the confidentiality of the information. Such recipients are typically partners, collaborators, lenders, customers, suppliers, merchant bankers, legal advisers, auditors, insolvency professionals and other advisers or consultants, with whom information is shared in the ordinary course of business under the company’s own policy for determining legitimate purposes. Many organisations give the same notice to internal persons who receive the information in the course of their duties.
The notice tells the recipient that what they hold is unpublished price sensitive information, and also puts them on notice that they are now an insider, with the restrictions on trading that follow. Without it, the company may struggle to show that it did what the regulation asks.
Timing is critical. The notice is most useful when it reaches the recipient at, or before, the moment the information is shared, so that there is no interval in which the recipient holds the information without knowing its status.
It may be given by email separately or may be incorporated in an NDA. Alternatively, the email transmission of this UPSI (where it is so transferred) can contain the notice of confidentiality itself to ensure conformance to the requirements. This is the ideal form, as the UPSI and the notice then travel together.
Whichever method is used, keep the evidence: what notice was given, to whom, when and in what form. The structured digital database records the sharing itself, including who passed the information on, to whom and when, so the notice sits naturally alongside that entry, and the two together show that the sharing was both recorded and accompanied by notice.
Affinisio(SDD) software for the SEBI-mandated structured digital database can enable you to send the email automatically as soon as the flow of UPSI is recorded, as an added precaution.
