Starting February 1, 2024, large-cap companies will have to compulsorily respond to market rumours within 24 hours of the occurrence of such event and information, the Securities and Exchange Board of India has announced. For mid-cap companies, the corresponding date is August 1, 2024.
Sebi announced the decision on September 30, 2023 under which these companies have to mandatorily verify and confirm, deny or clarify any market rumours within 24 hours of the occurrence of such event or information.
These announcements have been made in accordance with the revised guidelines under which these large-cap and mid-cap companies by market capitalisation will have to comply with Regulation 30(11) of the Listing Obligations and Disclosure Requirements (LODR) Regulations, 2015, from these respective dates – i.e. February 1, 2024 and August 1, 2024.
Under Regulation 30(11) of LODR Regulations, a listed entity should confirm or deny any reported event or information to stock exchange(s).
Market rumours, if left unchecked, can disrupt the normal functioning and behaviour of the securities market, potentially harming investors.
Sebi had previously introduced these provisions with deadlines set for large-cap companies at October 1, 2023 and for mid-cap companies at April 1, 2024, saying it is “essential to avoid establishment of a false market sentiment or impact on the securities of the entity”.
However, it has now extended these deadlines to February 1 and August 1, 2024.
Sebi said that “in recent years, a growing influence is being noticed of not just print media, but also television and digital media. In order to stay contemporary, companies need to keep pace and ensure verification of such rumours.”
Accordingly, “the listed entity shall first disclose to stock exchange(s) of such events, as soon as reasonably possible and not later than twenty four hours from the occurrence of event or information,” Sebi said in its notification.
The listed entity shall disclose on its website all such events or information which has been disclosed to stock exchanges under this regulation. It should make disclosures updating material developments on a regular basis, till such time the event is resolved.
Large-cap companies, constituting the top 100 by market capitalisation, are usually recognized brand names, and with considerable financial strength, and any market rumours left unchecked can cause considerable volatility in stock market. Mid-cap stocks, ranking from 101-250 by market capitalisation, are also stocks offering higher growth potential.
“Market rumours can do considerable damage to the normal functioning and behaviour of the securities market. It is therefore essential to have quick verification of such rumours from the corporates as well as from other entities whenever necessary,” Sebi added.