 "SEBI")
The Securities and Exchange Board of India (Sebi) on Thursday proposed changes to the verification of market rumours for listed companies, including relaxation on the 24-hour timeline, verification only on material impact on stock prices, and clarity on the pricing of preferential issuances, buybacks and deals.
In its consultation paper, the market regulator has included the suggestions of the Industry Standard Forum (ISF) for feedback.
The forum comprises representatives from industry bodies like Ficci, Assocham, and CII. The forum has suggested the listed firms should be required to verify only such rumours which lead to a material price movement. The price movement should be attributable only to the rumour.
ISF has further suggested determining material price movement based on the price range of the securities. For shares falling under the high price range, a lower percentage move would be considered as material, while for those in the lower price range, a higher variation would be considered material.
The forum also recommended factoring in the movements of the benchmark indices like the Sensex and the Nifty50 to decide material movement. In the paper, Sebi proposed that the timeline for verifying market rumours would be within 24 hours of the material price movement instead of 24 hours of reporting in the mainstream media.
The market regulator has also proposed obligating promoters, directors and key officials to provide accurate and timely responses in case the rumour pertains to them and not the listed firm. In cases where the rumour doesn’t lead to a material impact, the company may not confirm, deny or clarify it. To prevent insider trading in such cases, Sebi noted, “Such media reports should not be used later by an insider as a defence that the information was ‘generally available’.
More From This Section
In case a rumour is confirmed, Sebi has tried to bring clarity on the impact of price movement on the pricing of preferential issuances, deals, delisting, buybacks and certain such decisions by the listed companies.
The forum has proposed two different frameworks, one which takes the unaffected price and the other which excludes the price variation due to the rumour in the calculation of volume-weighted average price (VWAP) for transactions.
“ISF has proposed that the unaffected price may 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 (public announcement, board approval, as the case may be),” notes the paper.
“In case of a competitive bidding process for a potential M&A deal, where the sole/exclusive bidder has not been identified, the unaffected price is 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,” the paper adds.
The markets regulator has sought comments from the public on the proposals till January 18, 2024. Sebi had earlier extended till February 1, 2024, the implementation date for the rumour verification norm to the top 100 listed firms. Industry experts said that the regulator might have to push the implementation date further in case the proposals are not approved by the board before it.
Recommendations
- Rumour verification by the company within 24 hours of ‘material price movement’
- Currently, it is 24 hours of ‘reporting in the mainstream media’
- Determination of ‘material price movement’ based on price range of securities
- A lower percentage move considerable as ‘material’ for high price range shares
- Factor-in movements of benchmark indices to decide material movement
