SEBI issues a flurry of changes to tackle material price movement due to market rumours and to ensure a level playing field

• Verification of market rumours on MPM – The top 100 listed entities and thereafter top 250 listed entities w.e.f. from date the specified by SEBI[3] are required to comply with the following:

– Trigger for verification requirement – required to verify market rumours, upon occurrence of MPM as may be specified by the stock exchanges.

– Verification of all events/ information and not just “material” information – now any reported event or information in the mainstream media which is not general in nature, and which indicates that rumour of an impending specific event or information (previously specific “material” event or information) is circulating amongst the investing public is required to be verified.

– Verification timeline – as soon as reasonably possible but in any case, (previously “and”) not later than twenty-four hours from the trigger of price movement.

• No effect on equity share’s price due to MPM and confirmation of rumour if subject to pricing norms – If such a listed entity confirms any reported event or information within 24 hours from the trigger of a MPM, and if the event or information is subject to pricing norms under SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2018 (“ICDR Regulations”), Takeover Regulations or Buy-back Regulations or any other pricing norms specified by SEBI or stock exchanges, then the effect on the price of the equity shares of the listed entity due to MPM and confirmation of the reported event or information may be excluded for calculation of the price for that transaction as per the framework specified by SEBI[4].
• Adequate, accurate and timely response to queries – The promoter, director, key managerial personnel, or senior management of a listed entity shall provide adequate, accurate and timely response to queries or explanations requested by the listed entity shall adhere to the provisions of Regulation 30(11) wherein the listed entity may on its initiative, confirm or deny any reported event/ information to stock exchange. Furthermore, the listed entity must promptly disseminate the responses received from these individuals to the stock exchanges.

SEBI has vide its circular dated May 21, 2024 (available here) provided for industry standards to ensure compliance with Regulation 30(11) of LODR Regulations for verification of market rumours.

• In consultation with SEBI, an ISN has been issued to facilitate uniform approach and assist listed entities in complying with their obligations in respect of confirmation/ denial/ clarification of market rumours and sets out standard operating procedures for compliance with the rumour verification requirement;
• ISN provides clearly the guidelines on identifying the sources where any rumour is published and clarifies on:

– Definition of Mainstream Media;

– Meaning of ‘not general in nature’;

– Even if the market rumour is specific and impending, a confirmation/  denial/clarification of the market rumour will be required only if the market rumour  results in a ‘material price movement’, as per the framework issued by the stock  exchanges;

–  Market rumours reported between issuance of pre-intimation notice under Regulation 29(1), and conclusion of the Board Meeting.

• ISN also provides rumour verification standards for various stages of a potential M&A as well as non-M&A transaction (such as whistle blower, change in KMPs);
• ISN can be accessed at Notice Number (bseindia.com)

• The listed entity shall now give prior intimation to the stock exchange of at least two working days in advance, not counting the date of the notice or the meeting, about the board of directors’ meeting where any of the specified proposals viz. financial results, proposal for buyback of securities, proposal for voluntary delisting, fund raising by further public offer, etc. will be considered and the intimation is additionally required to mention the date of the board meeting.
• It has further been clarified that prior intimation for determination of issue price in a qualified institutions placement is not required if such placement is done in accordance with the provisions of the ICDR Regulations.
• The timelines for prior intimation for the following items have been revised from existing eleven working days to two working days in advance and added to the list provided under above:

– any alteration in the form or nature of any of its securities that are listed on the stock exchange or in the rights or privileges of the holders thereof; and

– any alteration in the date on which, the interest on debentures or bonds, or the redemption amount of redeemable shares or of debentures or bonds, shall be payable.

However, considering that the framework specified under Regulation 30(11) of the LODR Regulations vide the Circular for Framework for Unaffected Price (discussed above) is presently applicable to top 100 listed entities with effect from June 1, 2024 and thereafter top 250 listed entities with effect from December 1, 2024, the benefit of this amendment under Takeover Regulations will be available only to these top listed entities.

However, considering that the framework specified under Regulation 30(11) of the LODR Regulations vide the Circular for Framework for Unaffected Price (discussed above) is presently applicable to top 100 listed entities with effect from June 1, 2024 and thereafter top 250 listed entities with effect from December 1, 2024, the benefit of this amendment under Buy-back Regulations will be available only to these top listed entities.

NOTE: It is intended to define what constitutes generally available information so that it is easier to crystallize and appreciate what unpublished price sensitive information is. Information published on the website of a stock exchange, would ordinarily be considered generally available.

NOTE: It is intended to define what constitutes generally available information so that it is easier to crystallize and appreciate what constitutes unpublished price sensitive information is. Information published on the website of a stock exchange, would ordinarily be considered generally available.