Sebi Extends Deadline for Market Rumour Response Mandate by Large and Mid-Cap Companies; Know What It Means

The Securities and Exchange Board of India (Sebi) has again extended the deadline for large and mid-cap companies to verify and respond to market rumours by four months, citing the need to finalise industry standards and amend related regulations. Initially set for February 1, 2023, for large-caps and April 1, 2024, for mid-caps, the timeline has now been pushed back to June 1, 2024 and December 1, 2024, respectively.

“Considering the fact that the industry standards are under finalisation and certain amendments to LODR (Listing Obligations and Disclosure Requirements) Regulations are required for the implementation of the aforesaid provision, it has been decided to extend the timeline for the effective date of implementation,” said the market regulator.

This mandate aims to curb the damages of unchecked rumours on the stock market and thereby protect investors. Under Regulation 30(11) of the Listing Obligations and Disclosure Requirements (LODR) Regulations, 2015, the top 100 listed entities by market capitalisation and top 250 listed entities are required to confirm, deny, or clarify market rumours either disseminated through print, television, or digital media within 24 hours of their dissemination.

Also Read: NSE: World's Largest Derivatives Exchange For 5th Year, Ranks 3rd Globally In Equities Segment

What Are The Compliance Requirements?

As per Regulation 30(11) of LODR Regulations, a listed entity should confirm or deny any reported event or information to stock exchange(s). "The listed entity shall first disclose to stock exchange(s) of such events, "as soon as reasonably possible and not later than twenty four hours from the occurrence of event or information". The listed entity shall disclose on its website all such events or information which has been disclosed to stock exchanges under this regulation. It should make disclosures updating material developments regularly, till such time the event is resolved.

Market rumours, if left unchecked, can disrupt the normal functioning and behaviour of the securities market, potentially harming investors. Sebi introduced these provisions saying it is "essential to avoid establishment of a false market sentiment or impact on the securities of the entity." "In recent years, a growing influence is being noticed of not just print media, but also television and digital media. To stay contemporary, companies need to keep pace and ensure verification of such rumours," Sebi said.

Large-cap companies, constituting the top 100 by market capitalisation, are usually recognized brand names, and with considerable financial strength, and any market rumours left unchecked can cause considerable volatility in the stock market. Mid-cap stocks, ranking from 101st to 250th in market capitalisation, are also stocks offering higher growth potential.

“Market rumours can do considerable damage to the normal functioning and behaviour of the securities market. It is therefore essential to have quick verification of such rumours from the corporates as well as from other entities whenever necessary,” Sebi says.