📷 Image Credits: Moneycontrol
The top 100 listed companies by market capitalization will have to confirm or deny any market rumour reported in the mainstream media starting June 1. This rule, established by SEBI, requires these companies to promptly ‘confirm, deny, or clarify any reported event or information in the mainstream media that indicates rumours of an impending specific material event’ within 24 hours of the information’s release. SEBI’s rumour verification framework aims to ensure transparency and fairness in the market by excluding price volatility in calculating average market prices for corporate actions. This initiative is set to create a preferred market for investors worldwide.
The new regulation also dictates that when determining prices for corporate actions such as buybacks, qualified institutional placements, preferential allotments, and takeovers, any price movements resulting from confirmed rumours will be excluded. Market rumours can lead to considerable stock price volatility, impacting transactions and misrepresenting a company’s true value. SEBI’s framework seeks to address this issue by establishing an unaffected price for stock transactions prior to the emergence of the rumour. Unless the rumour itself causes subsequent price fluctuations, this pre-rumour price will be utilized for transactions going forward. This proactive approach aims to safeguard market integrity and investor confidence.
The financial community has welcomed SEBI’s move, acknowledging its role in curbing the dissemination of potentially misleading information that could impact market valuations. The requirement for timely responses from the top 100 companies will set a precedent for transparency in addressing rumours in the investing public. By enhancing the rumour verification framework through the exclusion of price volatility, SEBI is fostering a level playing field for investors and bolstering the credibility of Indian markets domestically and internationally. As SEBI continues to enact measures to strengthen market regulation, investors can expect greater clarity and reliability in their investment decisions.
