Topic: Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment.
5) What do you understand by unpublished price-sensitive information (UPSI). Discuss the steps taken by the SEBI in preventing trading based on UPSI. Also discuss further measures needed to prevent trading based on UPSI. (250 Words)
Why this question
Trading based on UPSI is among the most serious offences in the stock market. SEBI has stepped up on improving its surveillance mechanism after prescient messages, related to the financial results of several blue-chip companies, including Axis Bank, HDFC Bank and Tata Motors, were being circulated on WhatsApp. Early this year, Sebi had constituted a committee to suggest measures to improve surveillance and help prevent insider trading activities. This question comes under GS-3 syllabus under the following heading- Indian Economy and issues relating to planning, mobilization of resources, growth, development and employment. Inclusive growth and issues arising from it.
Key demand of the question
The question wants us to provide a concise yet comprehensive definition of USPIs. You can frame the definition in your own words also. The second part of the question wants us to briefly describe the slew of measures taken by SEBI in preventing trading based on USPI and also in we have to discuss their limitations and what more needs to be done.
What- The question simply wants a complete, concise definition of the term. You can frame the definition in your own words also. You should be able to convey the essence of the term.
Discuss- the question demands us to mention briefly, the prevalence of trading based on USPI and then, discuss in detail the steps taken by the SEBI in tackling the problem.
Structure of the answer
Introduction- You can start the answer directly with the definition and/or you can mention the recently constituted Vishwanathan committee.
Body- Divide the body of the answer into two parts. In one part, discuss the measures already taken by SEBI. In the other part discuss what more needs to be done in the light of suggestions made by Vishwanathan committee (as reported in above articles).
In the conclusion, mention the importance of a fair trading environment in bolstering innovation, rewarding entrepreneurship, catalyzing development etc.