Changes in SEBI Regulations with respect to verification of market rumour
I. The Securities and Exchange Board of India (SEBI) has notified the SEBI (Listing Obligations and Disclosure Requirements) (Amendment) Regulations, 2024, effective from May 17, 2024, which inter alia amends the provisions of Regulation 30(11).
The amended provision reads as follows:
[Red struck out text
denotes deletions and green text denotes insertion]
“30(11)
The listed entity may on its own
initiative also, confirm or deny any reported event or information to stock
exchange(s) :
Provided
that the top 100 listed entities and thereafter the top
250 listed entities, with effect from the date as
may be specified by the Board, shall
confirm, deny or clarify upon the material price
movement as may be specified by the stock exchanges, any reported event
or information in the mainstream media which is not general in nature and which
indicates that rumours of an impending
specific material event or information in terms of the provisions of this regulation are
is circulating amongst the investing public, as soon as reasonably possible and but in any case not later than twenty four
hours from the reporting of the event or information
trigger of material price movement:
Provided
further that if the listed entity confirms the reported event or information,
it shall also provide the current stage of such event or information.:
Provided further that when the listed entity confirms within
twenty four hours from the trigger of material price movement, any reported
event or information on which pricing norms provided under Chapter V or Chapter
VI of the Securities and Exchange Board of India (Issue of Capital and
Disclosure Requirements) Regulations, 2018 or pricing norms provided under
Regulation 8 or Regulation 9 of the Securities and Exchange Board of India
(Substantial Acquisition of Shares and Takeovers) Regulations, 2011 or pricing
norms provided under Regulation 19 or Regulation 22B of the Securities and
Exchange Board of India (Buy-back of Securities) Regulations, 2018 or any other
pricing norms specified by the Board or the stock exchanges are applicable,
then the effect on the price of the equity shares of the listed entity due to
the material price movement and confirmation of the reported event or
information may be excluded for calculation of the price for that transaction
as per the framework as may be specified by the Board.
Explanation – The top 100 and 250 listed entities shall be
determined on the basis of market capitalization, as at the end of the
immediately preceding financial year.] (Note: Omission of the
Explanation under sub-regulation (11)) shall come into effect from December 31,
2024.
(11A) The promoter, director, key managerial personnel or senior
management of a listed entity shall provide adequate, accurate and timely
response to queries raised or explanation sought by the listed entity in order
to ensure compliance with the requirements under sub-regulation 11 of this
regulation and the listed entity shall disseminate the response received from
such individual(s) promptly to the stock exchanges.”
1. Top
100 listed entities and thereafter, the top 250 listed entities, with effect
from the date specified by SEBI, shall confirm, deny, or clarify the material price movement as may be
specified by the stock exchanges, 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 is circulating amongst the
investing public,
within 24 hours of the trigger.
Effective Date for implementation of this provision:
SEBI Circular dated
January 25, 2024 (SEBI | Extension of
timeline for verification of market rumours by listed entities) specified the effective
date of implementation of the proviso to regulation 30(11) of the LODR
Regulations for top 100 listed entities by market capitalization, as June 1, 2024 and
for top 250
listed entities by
market capitalization, as December 1, 2024.
Framework for determining
material price movement:
Stock Exchanges will
specify the framework for determining the material price movement.
The Industry Standards Forum (ISF),
formed by SEBI by bringing together ASSOCHAM, CII, and FICCI under the Stock
Exchanges is developing the standards for effective rumor verification in
consultation with SEBI. The memorandum seeking SEBI's approval for amending the
provisions of the SEBI (LODR) Regulations and SEBI (Prohibition of Insider Trading)
Regulations, 2015, outlines the following basis for determining material price
movement. This is based on the analysis of public comments on SEBI’s
consultation papers dated December 28, 2023.
The percentage variation considered for
different price range is given below.
|
Price range of the listed equity shares |
Percentage variation in share price which is treated as |
|
|
Benchmark index movement is less than 1% at 9:30 am |
Benchmark index movement is greater than or equal to 1%
at 9:30 am |
|
|
Rs. 0-99.99 |
Greater than
or equal to 5% |
Greater than
or equal to (5% + % change in benchmark index at 9:30) or price band limit |
|
Rs.
100-199.99 |
Greater than
or equal to 4% |
Greater than
or equal to (4% + % change in benchmark index at 9:30) or price band limit |
|
Rs. 200 and
above |
Greater than
or equal to 3% |
Greater than
or equal to (3% + % change in benchmark index at 9:30) or price band limit |
For negative news/rumors, the parameter cutoff will be calculated using
the same thresholds as for positive rumors, but applied in the opposite
direction as below:
|
Price range of the listed equity shares |
Percentage variation in share price which is treated as |
|
|
Benchmark index movement is less than 1% at 9:30 am |
Benchmark index movement is greater than or equal to 1%
at 9:30 am |
|
|
Rs. 0-99.99 |
Less than or
equal to -5% |
Less than or
equal to (-5% - % change in benchmark index at 9:30) or price band limit |
|
Rs.
100-199.99 |
Less than or
equal to 4% |
Less than or
equal to (-4% - % change in benchmark index at 9:30) or price band limit |
|
Rs. 200 and
above |
Less than or
equal to -3% |
Less than or
equal to (-3% - % change in benchmark index at 9:30) or price band limit |
The percentage variation is taken from
the close price of the last trading day. To account for market dynamics, price
variations in a listed entity's securities are indexed to Nifty 50/Sensex
movements if the benchmark index changes by more than 1% at 9:30 am compared to
the previous day's close. This benchmarking considers significant market-wide
movements due to news or information after the previous trading day's close.
2.
If the listed entity confirms any reported event or
information within 24 hours of the trigger of material price movement, the
effect on the share price due to this movement and confirmation may be excluded
from the price calculation, as per the framework as may be specified by the
Board, for transactions under the relevant SEBI regulations and any other
pricing norms specified by SEBI and Stock Exchanges.
Framework
to consider unaffected share prices of listed entities for transactions
following market rumor confirmation:
SEBI will specify the framework for
excluding the effect on the share price due to material price movement and
confirmation of rumour.
Transactions relating to securities of
a listed entity must adhere to SEBI regulations, which specify pricing based on
the market price of equity shares traded on stock exchanges:
a.
For preferential issues under the ICDR Regulations, the floor price is
determined using the volume-weighted average price (VWAP) of 90 or 10 trading
days preceding the relevant date.
b.
In the case of QIPs, the ICDR Regulations stipulate the floor price as the
VWAP of the 2 weeks before the relevant date.
c.
SAST Regulations govern open offers and delisting offers, with floor
prices determined by factors like the VWAP of shares acquired by the acquirer
over 52 weeks and the volume-weighted average market price over 60 trading days
preceding the public announcement date.
d.
Buy-back Regulations provide pricing norms for share buy-backs, whether in
the open market through stock exchanges or through the book-building process.
In this context, for determining the pricing of transactions
relating to the securities of a listed entity, ISF has suggested that ‘unaffected
price’ should be considered when the listed entity confirms the market
rumour due to material price movement.
In this context, SEBI has notified the Securities and Exchange Board of India (Substantial Acquisition of Shares and Takeovers) (Amendment) Regulations, 2024 and the Securities and Exchange Board of India (Buy-Back of Securities) (Amendment) Regulations, 2024 effective from May 17, 2024, excluding effect on the price of the equity shares of the company due to material price movement and confirmation of reported event or information, as per the framework specified under Regulation 30(11) of SEBI (LODR) Regulations, 2015 for calculation of price of equity shares or volume weighted average market price, as the case may be.
3. Promoters, directors, key managerial personnel, and
senior management of a listed entity must provide accurate and timely responses
to queries or explanations sought by the entity to ensure compliance with
regulation 30(11) for verifying market rumour. The entity must promptly
disseminate these responses to the stock exchanges.
II. The Securities and Exchange Board of India
(SEBI) has notified the SEBI (Prohibition of Insider
Trading) (Amendment) Regulations, 2024, effective from May 17, 2024, which
inter alia amends the provisions of Regulation 2(1)(e).
The
amended provision reads as follows:
[Red struck out text
denotes deletions and green text denotes insertion]
"Generally
available information" means information that is accessible to the public
on a non-discriminatory basis and shall not
include unverified event or information reported in print or electronic media.
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.
Summary
of changes made:
Unverified event or information reported in print or electronic media not
to be considered as ‘generally available information’ under SEBI (Prohibition
of Insider Trading) Regulations, 2015.
CONCLUSION
Action required to be taken by Top 100 and 250 listed entities:
- Track ‘material price movement’ in share price. Various services are available in the market for tracking the current market price of the equity shares of a listed entity. A listed entity may avail such services or develop in-house capacity for tracking price movement.
- Search for 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 is circulating amongst the investing public.
- The ‘code of practices and procedures for fair disclosure of unpublished price sensitive information’ formulated in pursuance of Regulation 8 of the SEBI (PIT) Regulations, 2015 may be amended to incorporate the procedural steps to ensure compliance with the above amendments. Also, the ‘policy for determination of materiality of events or information’ required under Regulation 30(4)(ii) of the SEBI (LODR) Regulations, 2015 may be amended for timeline of reporting from ‘24 hours from reporting of event or information’ to ‘24 hours from trigger of material price movement’. However, such amendment of policies can wait, as the law has an overriding effect regardless. Also, framework for determining ‘Material Price Movement’ is yet to be specified by SEBI.
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