Material price movement not material event to be considered for rumour verification, proposes SEBI

Stock Market

Material price movement and not material event as defined under Regulation 30 of the listing regulations should be considered for rumour verification, suggested a consultation paper on the same released by the market regulator SEBI.

On November 22, Moneycontrol had reported that the rumour-addressal mandate for listed entities was unlikely to be implemented in its current form, as it would cause legal and operational difficulties for companies.

Currently, material events or information specified under Regulation 30 of Listing Obligations and Disclosure Requirements (LODR) Regulations have to be verified, after a rumour on the same has been circulated in mainstream media. The rumour has to be verified within 24 hours of reporting in mainstream media.

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However, in the consultation paper released by the Securities and Exchange Board of India (Sebi) on December 28, it has been suggested that rumour verification should be done only if there is a material price movement.

According to the paper, the top 100 listed companies will have to verify market rumours from February 1, 2024, while the top 250 firms will have to carry out the exercise from August 1, 2024.

"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," said the consultation paper.

The ISF has suggested that rumour verification requirements be applicable only if there is a material price movement.

Material price movement may be determined based on two factors — price range of securities of the listed entity, and movement in the benchmark index.

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"For securities under a high price range, even a smaller percentage variation in the price would lead to a higher price variation in absolute terms. Hence, for determining material price movement, a lower percentage variation should be considered for securities falling under the high price range and a higher percentage variation should be considered for securities falling under the low price range," the ISF said.

"In order to factor in market dynamics, the price variation in the securities of the listed entity may be indexed to movement in Nifty50/Sensex (benchmark index)," it added.