Materiality of an event should be judged by price variation, suggests a SEBI paper

On Thursday, December 28, the Securities and Exchange Board of India (SEBI) released a consultation paper proposing that rumour verification should focus on material price movements rather than material events defined by Regulation 30 of the listing regulations.

In its paper, SEBI stated that companies should verify rumours only if the share price moves significantly. Rumours relating to company officials and directors should be verified.

Listing Obligations and Disclosure Requirements (LODR) Regulations require verification of material events or information after rumours circulate in mainstream media about them. It is necessary to verify rumours within 24 hours of their publication in mainstream media, according to SEBI.

Market rumours must be verified by the top 100 listed companies by February 1, 2024, while those in the top 250 must do so by August 1, 2024.

In order to prevent false market sentiment and its impact on the listed entity’s securities, the rumour verification requirement was introduced. There are many rumours floating around in the market that may or may not affect the securities of the listed company materially. According to the consultation paper, only rumours regarding material events or information should be verified by the listed entity.

It was suggested by the Indian Standards Forum (ISF) to define ‘materiality’ based on price movements in the scrip of the listed entity so that rumours that cause sudden moves in the price can be promptly verified.

SEBI suggests that emphasising ‘materiality’ in terms of price movement, as opposed to a material event under Regulation 30 of the LODR Regulations, might be more pertinent for fulfilling the rumour verification mandate. The market regulator has invited comments on the consultation paper regarding market rumour verification norms by January 18.