Sebi extends timeline for verification of market rumours by listed entities

“It has been decided to extend the effective date of implementation of the proviso to regulation 30(11) of the LODR Regulations for top 100 listed entities by market capitalization, to February 1, 2024 and for top 250 listed entities by market capitalization, to August 1, 2024,” the capital market regulator said in a circular.

Under Sebi (Listing Obligations and Disclosure Requirements) Regulations, 2015, the top 100 listed entities by market capitalization were with effect from October 1, 2023 and top 250 listed entities by market capitalization with effect from April 1, 2024, were to mandatorily verify and confirm, deny or clarify market rumours.

In order to bring more transparency and to ensure timely disclosure of material events or information by listed entities, the Sebi had introduced new disclosure norms earlier this year.

Legal experts say there have been instances where news regarding ongoing deals are prematurely leaked, even during the initial stages of negotiations. Sebi regulations may compel firms to prematurely disclose developments.

The new disclosure norms will help investors make informed decisions. By directing companies to issue a quick clarification on any market rumor, the Sebi wants to protect investors, who will be able to make better decisions about whether or not to invest in a particular company.

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Sebi rules mandate every listed firm to maintain a list of thresholds, above which any news would be considered a material development. For example, any acquisition worth over ₹ 100 crore, or a plant shutdown if the facility contributes 10% or more to the company’s revenues.

This new law is based on a discussion paper floated by Sebi last November, when it proposed a number of changes to the disclosure rules. Sebi had opined that the proposal was essential to avoid “establishment of a false market sentiment”, and added that such rumours appearing not just in print media but on TV and digital media were increasingly impacting stock movement.

Sebi had rationalized several disclosure requirements for listed companies in 2019 allowing them greater headroom to decide on what is important and what is not. However, recently, it noticed that many firms were flouting disclosure norms. In the last three-four months, Sebi has floated several discussion papers proposing the tightening of various disclosure norms.

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Updated: 01 Oct 2023, 07:23 PM IST