Industry Standards Forum (ISF), a body set up by the market regulator under the aegis of the stock exchanges, has proposed that the requirement for rumour verification for listed firms be made applicable whenever there is a material “price movement” of the entities’ securities — instead of a material “event”.
To determine the material price movement, a lower percentage variation may be considered for securities falling under high price range and a higher percentage variation may be considered for securities falling under low price range. To factor in market dynamics, the price variation in the securities of the listed entity may be indexed to movement in Nifty 50 or the Sensex.
The first proviso to Regulation 30(11) of LODR Regulations requires listed entities to verify and confirm, deny or clarify market rumours within 24 hours of it being reported in the mainstream media. This will now be required to be done within 24 hours of the material price movement.
SEBI has extended the timeline for rumour verification to February 1 and August 1 next year for top 100 and top 250 listed firms by market capitalisation, respectively.
ISF has suggested that the unaffected price be considered to determine the pricing of transactions when the listed entity confirms the market rumour due to material price movement. The unaffected price may be applicable for 60 days from the date of confirmation of the market rumour till the date of a public announcement, board approval, etc, as the case may be. For a potential M&A deal, where the exclusive bidder has not been identified, the unaffected price may be considered for 180 days.
“There is a need to cast an obligation upon the promoters, directors, KMP and senior management to provide adequate, accurate and timely response to queries raised or explanation sought by the listed entity in order to ensure compliance with regulation 30(11) of LODR Regulations,” the consultation paper said.
There may be instances where a rumour pertaining to a listed entity is circulating in the market but doesn’t result in material price movement.
“In case the listed entity has classified certain information as UPSI and the entity neither confirms, denies or clarifies market rumour pertaining to such information published in the media, then such media reports should not be used later by an insider as a defence that the information was ‘generally available’,” the paper said.
