Proposal to verify the rumours in the Stock Market – SEBI

Proposal to verify the rumours in the Stock Market – SEBI

Subject :Economy

Section: Monetary Policy

The Industry Standards Forum (ISF), a body established by the Securities and Exchange Board of India (SEBI) under the aegis of stock exchanges, has proposed a change in the criteria for rumour verification for listed firms.

The suggestion is to make the requirement for rumour verification applicable whenever there is a material “price movement” of the entities’ securities, rather than a material “event.”

Key points of the proposal:

1. Material Price Movement: Rumour verification would be triggered by a material price movement in the securities of listed entities.
2. Percentage Variation: To determine material price movement, a lower percentage variation may be considered for securities falling under a high price range, and a higher percentage variation may be considered for securities falling under a low-price range.
3. Indexing to Market Movements: The price variation in the securities of the listed entity may be indexed to the movement in Nifty 50 or the Sensex to factor in market dynamics.
4. Extension of Timeline: SEBI has extended the timeline for rumour verification to February 1 and August 1 for the top 100 and top 250 listed firms by market capitalization, respectively.
5. Unaffected Price for Transactions: The unaffected price would be considered to determine the pricing of transactions when the listed entity confirms the market rumour due to material price movement.
6. Obligation on Promoters and Management: There is a proposal to cast an obligation upon promoters, directors, Key Managerial Personnel (KMP), and senior management to provide adequate, accurate, and timely responses to queries raised or explanations sought.
7. Use of Classified Information: If a listed entity has classified certain information as Unpublished Price Sensitive Information (UPSI) and does not confirm, deny, or clarify a market rumour related to such information, the media reports should not be used later by an insider as a defense that the information was “generally available.”

This proposed change aims to align rumour verification with market movements and enhance transparency and timely communication in response to material developments.

About Price Move and Material Movement?

1. Price Move:
   • Definition: A price move refers to a change in the price of a security, such as a stock, bond, or commodity, over a specific period of time.
   • Significance: Traders and investors closely monitor price moves to make informed decisions about buying or selling securities. Price moves can be influenced by various factors, including market news, economic indicators, corporate earnings, and geopolitical events.
2. Material Movement:
   • Definition: Material movement, in the context of market regulations, often refers to a significant change or event related to a company or its securities that could impact the market value of those securities.
   • Significance: Material movements are typically associated with information that is considered “material” or important enough to influence an investor’s decision. Material information is often non-public and may include details about financial performance, mergers and acquisitions, regulatory approvals, or other events that could affect the company’s stock price.

About SEBI (Prohibition of Insider Trading) Regulations, 2015

The Securities and Exchange Board of India (SEBI) (Prohibition of Insider Trading) Regulations, 2015, aims to prevent insider trading in securities.

Insider trading refers to the buying or selling of a company’s securities by individuals who have access to non-public, material information about the company. The regulations aim to maintain a level playing field for all market participants and ensure fairness and transparency in the securities market.

The regulations define insider trading and specify who qualifies as an “insider.” Insiders include company officials, connected persons, and those in possession of unpublished price-sensitive information (UPSI).

The regulations prescribe penalties for insider trading violations, which may include monetary fines, disgorgement of profits, and prohibition from trading in the securities market.

The SEBI (Prohibition of Insider Trading) Regulations, 2015, play a crucial role in fostering investor confidence and ensuring the integrity of the securities market in India by preventing the misuse of confidential information for trading purposes.