Sebi, through its newly introduced rumor verification framework, has ruled out price volatility while arriving at an average market price for the purpose of corporate actions | Photo: Bloomberg
The top 100 listed companies by market capitalization will have to confirm or deny any market rumor reported in the mainstream media starting this Saturday.
The rule applies from December 1 to the top 250 companies.
Under the Sebi’s rule, these companies will have to confirm, deny or clarify ‘any reported event or information in the mainstream media that is not general in nature and which indicates that rumors of an impending specific material event are circulating’ among the investing public. within 24 hours of reporting the information.
Sebi, through its newly introduced rumor verification framework, has ruled out price volatility while determining the average market price for the purpose of corporate actions in a bid to make it fair to all investors at large.
“This step would discourage leakage of information that would impact the valuation of the given corporate action. This initiative by Sebi would help strengthen the framework for rumor verification. It would help in achieving a fair market, making it a preferred market for investors around the world. world,” said Makarand M Joshi, founder of MMJC and Associates, a compliance firm.
Although calculating the price for various corporate actions such as book building repurchases, stock exchange repurchases, qualified institutional placement, preferential allocation, acquisitions, the effect on the stock price due to material price movements and confirmation of reported events or information may be excluded.
It means that when calculating the price for corporate actions, the period when material price movements in the shares were observed due to confirmed rumors would be excluded.
Market rumors about a company’s activities can cause significant volatility in stock prices, which can often lead to transactions that do not reflect a company’s true value. These market rumors can be related to anything, including top management departures, order cancellations and financial health.
“Sebi’s framework addresses this issue by putting in place a mechanism to determine the pristine price – the price of a stock before the rumor emerged. This price would be used for transactions unless the rumor itself caused price movements on subsequent trading days,” says Trivesh, Chief Operating Officer of Tradejini, had said.
(Only the headline and image of this report may have been reworked by Business Standard staff; the rest of the content is automatically generated from a syndicated feed.)
First print: June 1, 2024 | 11:33 am IST