Comments READ LATER After many postponements, a new Securities and Exchange Board of India (SEBI) framework requiring listed companies to verify market rumours is set to take effect from June 1. It will first apply to the top 100 listed companies and then extend to the top 250 by December 1. Under the new rules, companies will be required to track news about impending corporate actions in the mainstream media.
If the news/rumour is accompanied by material stock price movements, then the company will need to issue a confirmation or denial to the stock exchange within 24 hours. Stock price moves caused by confirmed events will be excluded for the purpose of calculating benchmark prices in situations such as mergers, takeovers, delisting and preferential offers. However, SEBI’s attempt to implement this in 2023 led to a demand for specific definitions of terms such as rumour, mainstream media, material stock price movement and impending event.
SEBI roped in the Industry Standards Forum consisting of the industry chambers to flesh out these aspects, but the definitions have ended up overly complicating the rules. SEBI seems to have initiated this overhaul for two key reasons. The first is to remove subjectivity in the determination of material events.
Under the earlier version of Listing Obligations and Disclosure Requirements (LODR) Regulations, every listed company was required to disclose any event or information which, in the opinion of its Board, was material. Materiality .