SEBI extends market rumour verification deadline: A paradigm shift in Indian financial regulations

In a move that has left India’s financial markets buzzing with anticipation, the Securities and Exchange Board of India (SEBI) has taken a bold step by extending the deadline for market rumour verification. The timeline for verification of market rumours to February 1, 2024, for the top 100 listed firms by market capitalisation and to August 1, 2024, for the top 250 listed entities, marks a significant shift in the regulatory landscape.

Originally, these stringent norms were slated to be enforced starting October 1 of this year for the top 100 firms and from April 1, 2024, for the top 250 entities. However, it was met with resistance from corporate giants who found themselves caught in a whirlwind of uncertainty.

Under these groundbreaking regulations, companies are now entrusted with the task of promptly confirming, denying or clarifying any reported events or information in the mainstream media. These reports, when not of a general nature, serve as signals that rumours regarding specific material events or information are circulating among the investing public. The catch? They must do so within a mere 24 hours from the initial reporting of the event or information. Should the reported information be confirmed, the firm must also provide an update on the current status of said event or information.

This monumental shift in SEBI’s approach to market rumours contradicts the traditional stance held by companies that silence is golden when confronted with rumours. According to a recent report by Vinod Kothari Consultants, jurisprudence in securities litigation has typically favoured companies choosing to remain tight-lipped. However, stock exchanges have long maintained that companies bear a responsibility to promptly notify the investing public of material news and developments.

Interestingly, this principle can be traced back several decades to a 1981 version of the New York Stock Exchange (NYSE) Manual, which has consistently required a “frank and explicit” response from listed companies. Such rules have remained integral to both the NYSE and the NASDAQ rulebooks over the years.

“The amendments in Regulation 30(11) are in line with global regulations. The introduction of the requirement for top-listed companies is only a precursor to widening its applicability in the course of time,” states the note, indicating that SEBI’s decision aligns with global practices.

In summary, SEBI’s extension of the timeline for verifying market rumours is a pivotal moment in India’s financial regulatory landscape, ushering in an era of greater transparency and responsiveness from listed companies. With global parallels and a push for even wider implementation in the future, the stage is set for a new chapter in India’s securities market.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.