Consultation paper on amendments to SEBI regulations with respect to verification of market rumour
SEBI has 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. Promoters, directors, key managerial personnel (“KMP”) and senior management would be responsible for promptly verifying any rumours related to their organisations.
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 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.
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.
SEBI has invited comments and feedback on the proposed market rumour verification norms, with the deadline set for January 18, 2024.
