SEBI proposes new norms for market rumour verification; focus on price movements
Currently, under Regulation 30(11) of LODR Regulations, a market rumour is required to be verified within 24 hours of reporting in the mainstream media. As per the new norms, a rumour has to be verified within 24 hours of material price movement.
The Securities and Exchange Board of India (SEBI) on Wednesday, December 27, floated a consultation paper proposing new norms for the verification of market rumours by listed companies. According to the proposed framework, companies will be mandated to verify rumours only if there are significant movements in their share prices.
Key officials, directors, and executives of the concerned companies would be responsible for promptly verifying any rumours related to their organisations, it added.
Currently, under Regulation 30(11) of LODR Regulations, a market rumour is required to be verified within 24 hours of reporting in the mainstream media.
As per the new norms, a rumour has to be verified within 24 hours of material price movement.
According to the paper, the top 100 listed companies will have to verify market rumours from February 1, 2024, while the top 250 firms will have to carry out the exercise from August 1, 2024.
"The rumour verification requirement was introduced to avoid false market sentiment or impact on the securities of the listed entity. There may be many rumours circulating in the market which may or may not have a material impact on the securities of the listed entity. Hence, it was envisaged that only rumours about material events or information should require verification by the listed entity," the consultation paper stated.
The paper also suggested that material price movement be determined by a percentage variation in the stock price and recommended indexing scrip price variation to the movement in Nifty50 or Sensex. Moreover, if a stock price moves due to multiple factors, including rumours and official announcements, SEBI proposed attributing the material price movement specifically to the rumour.
The Indian Standards Forum (ISF) has suggested to define ‘materiality’ in terms of price movement in the scrips of the listed entity since the aim is to ensure prompt verification of rumours that results in a sudden movement in the price of the scrips of the listed entity.
Hence, defining ‘materiality’ in terms of price movement instead of material event in terms of Regulation 30 of LODR Regulations may be more relevant for the rumour verification requirement, said SEBI.
As part of the consultation process, SEBI has invited comments and feedback on the proposed market rumour verification norms, with the deadline set for January 18, 2024.
One of the key considerations in the SEBI white paper is whether promoters, directors, key managerial personnel (KMP), and senior management should be mandated to provide adequate, accurate, and timely responses to queries or explanations sought by the listed entity. This would be especially relevant in cases where the rumour or news pertains to the KMP or executives, and the company requires time to verify the information from the concerned individuals.
(Edited by : Shoma Bhattacharjee)
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