Sebi Floats Fresh Consultation Paper On Mkt Rumours Verification

Capital markets regulator Sebi on Thursday floated a fresh consultation paper proposing that only rumours pertaining to material events or information should require verification by the listed entity.

The regulator has proposed two frameworks with respect to deciding on the unaffected share price of a listed company for the purpose of pricing transactions concerned, following confirmation of the market rumour.

In case the listed entity has classified certain information as unpublished price sensitive information (UPSI) and the entity neither confirms or denies market rumour pertaining to such information published in the media, then such media reports should not be used later by an insider as a defence that the information was 'generally available'.

Under the Listing Obligations and Disclosure Requirements (LODR) rules, listed entities are required to confirm or deny rumours which are reported in the mainstream media. This rule will be applicable to the top 100 listed entities from February 1, 2024 and to the top 250 listed entities from August 1, 2024.

The Securities and Exchange Board of India (Sebi) has sought comments from the public till January 18 on the fresh proposals.

To facilitate ease of doing business, ASSOCHAM, CII, and FICCI jointly formed the Industry Standards Forum (ISF) under the guidance of stock exchanges.

During discussions between Sebi and ISF on the standards for the rumour verification requirement, issue was raised regarding market price of the shares of the listed entity getting affected upon confirmation of market rumours by the listed entity.

Additionally, it has been suggested to place an obligation on promoters, directors, and senior management to provide adequate, accurate and timely response to the queries raised or explanation sought in respect of market rumours by the listed entity, according to the fresh consultation paper on market rumours.

This initiative, endorsed by SEBI, aims to establish and uphold industry standards for a more efficient business environment.

ISF took up the rumour verification requirement as one of the pilot projects for formulating standards for effective implementation of the requirement.

In the consultation paper, ISF proposed that the "rumour verification requirement shall be applicable if there is a material price movement in the securities of the listed entity".

The material price movement in the securities of the listed entity may be determined based on the price range of the securities of the listed entity and movement in the benchmark index (Nifty50 / Sensex).

"There may be price movement due to a combination of various factors such as rumour, announcements or other events. However, under the proposed framework, the material price movement would be attributable only to the rumour, and thus would require verification of such rumour, " Sebi said.

It has been proposed that the timeline for verifying market rumour will be within 24 hours of material price movement instead of within 24 hours of reporting in the mainstream media as per the existing rumour verification requirement.

ISF has suggested that unaffected price should be considered when the listed entity confirms the market rumour due to material price movement.

The unaffected price should be applicable for a period of 60 days from the date of confirmation of the market rumour till the 'relevant date' under the existing regulations such as public announcement, board approval.

However, in case of a competitive bidding process for a potential M&A deal, where the sole bidder has not been identified, the unaffected price has been proposed to be applicable for a time-period of 180 days from the date of confirmation of the market rumour till the 'relevant date' under the existing regulations.