SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (LODR Regulations) is one of the primary legislations governing listed entities in India. Recently, certain amendments to the LODR Regulations were notified whereby listed entities were mandated to verify, confirm, deny or clarify market rumours in relation to a ‘material’ event/information (as understood under the LODR Regulations) reported in the mainstream media, within 24 hours (Rumour Verification Requirement).
This Rumour Verification Requirement was met with some concerns from the industry and legal professionals at the time of its introduction, given its potential for impeding M&A transactions and the challenges associated with monitoring such market rumours. Also, the Rumour Verification Requirement was a deviation from the standards followed internationally, especially, in jurisdictions such as the UK and USA.
In response to such concerns, the Securities and Exchange Board of India (SEBI), on December 28, 2023, published a consultation paper proposing certain changes and clarifications to the regulatory framework governing the Rumour Verification Requirement (Consultation Paper). The Consultation Paper inter alia sets out the following:
- The scope of events/information regarding which a rumour needs to be responded to by the listed entity is proposed to be reduced. This is proposed by linking ‘materiality’ of an event/information to the price movement in the scrips of the listed entity beyond a certain quantitative threshold, instead of to the LODR Regulations.
- Under Indian securities laws, the pricing of several corporate actions or transactions by a listed entity is linked to the volume weighted average market price of the securities of the listed entity. Given that verification of a market rumour by the company could affect the market price of the securities – and consequently the pricing for the particular corporate action/transaction – the Consultation Paper proposes certain avenues for the exclusion of the period for which the market price of the securities can be presumed to be influenced by the verification of the market rumour.
The proposed changes in the Consultation Paper would be a welcome change for all listed entities and it would be interesting to note how the Rumour Verification Requirement is now implemented and interpreted by SEBI.