SEBI Regulations to Tackle Market Rumours

Need of SEBI Regulation

• To ensure that unverified rumours do not shake investor confidence and affect decision-making.
• To ensure timely disclosure of significant material events or information.
• Uniformity for disclosures by listed entities, to help them better determine what constitutes a material event or information.
• It is done under SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.
• To keep pace with the changing market dynamics.
  • In the age of readily available information, it is expected that the listed entities adopt technology-based solutions for ease of compliance.

Highlights of SEBI Regulation

• Goal: To tackle ambiguity by provisioning room for relevant disclosures.
• Proposed Revisions In Materiality Thresholds:
  • SEBI proposes quantitative thresholds to replace the current process of assessment of the materiality of an event, which is done by the company’s board.
  • Listed entities should disclose all events or information whose threshold value or expected impact in terms of value exceeds 2% of either its turnover or net-worth as per the last audited standalone financial statement, or 5% of the three-year average of absolute value of profit/loss after tax as per the last three audited standalone financial statements of the entity.
  • Companies should disclose their loan agreements as a lender and not just as a borrower
• Proposed Disclosures:
  • They are directed towards preventing any false market sentiment or impact on the securities of a company.
  • Top 250 listed entities, based on market capitalisation at the end of the previous assessment year, would have to clearly deny or refute such rumours.
  • Companies need to disclose any actions initiated by a regulatory, statutory, enforcement or judicial authority against any of its directors, key managerial personnel, promoter or subsidiary in relation to the entity.
  • It include lowering disclosure thresholds and a better illustration of what constitutes a material event.
• Timeline For Disclosure
  • SEBI proposes that disclosures relating to events or information originating from within the company be made within twelve hours instead of the existing mandate of twenty-four hours.
  • SEBI proposes revising the 5% threshold to 2% for companies to disclose acquiring shares or voting rights in a company.
  • It proposes giving 12 hours for the disclosure of all such transactions.

Securities and Exchange Board of India (SEBI)

• It is India’s securities and commodity market regulator, reporting to the Ministry of Finance of the Indian government.
• It is a statutory body formed under SEBI Act of 1992.
• SEBI is a quasi-legislative and quasi-judicial body which can draft regulations, conduct inquiries, pass rulings and impose penalties.
• It functions to fulfill the requirements of three categories –
  • Issuers – By providing a marketplace in which the issuers can increase their finance.
  • Investors – By ensuring safety and supply of precise and accurate information.
  • Intermediaries – By enabling a competitive professional market for intermediaries.

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