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Updated December 29th, 2023 at 18:16 IST

SEBI proposes new guidelines for market rumour verification

Starting from February 1, 2024, top 100 listed companies will be required to verify market rumours, with the top 250 firms following suit from August 1, 2024.

Business Desk
SEBI
SEBI | Image:Shutterstock
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The Securities and Exchange Board of India (SEBI) has introduced a consultation paper on December 27, outlining proposed norms for the verification of market rumours by listed companies. Under the suggested framework, companies will be obligated to verify rumours only if there are significant movements in their share prices.

The responsibility for promptly verifying any rumours related to their organisations lies with key officials, directors, and executives of the concerned companies, according to the proposed guidelines.

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Starting from February 1, 2024, the top 100 listed companies will be required to verify market rumours, with the top 250 firms following suit from August 1, 2024. The introduction of the rumour verification requirement aims to prevent false market sentiment or the impact on the securities of the listed entity.

The consultation paper proposes determining material price movement based on a percentage variation in the stock price, recommending indexing scrip price variation to the movement in Nifty50 or Sensex. 

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Additionally, if a stock price moves due to multiple factors, including rumours and official announcements, SEBI suggests attributing the material price movement specifically to the rumour.

The Indian Standards Forum (ISF) has recommended defining 'materiality' in terms of price movement in the scrips of the listed entity, aligning with the objective of ensuring the prompt verification of rumours resulting in sudden movements in scrip prices.

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SEBI stressed on the need for defining 'materiality' in terms of price movement rather than a material event, as outlined in Regulation 30 of LODR Regulations. 

As part of the consultation process, SEBI invites comments and feedback on the proposed market rumour verification norms, with the deadline set for January 18, 2024.

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A key consideration 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 is particularly 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.

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Published December 29th, 2023 at 10:16 IST

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