SEBI Regulations to Tackle Market Rumours

Table of Contents

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.