Explained | SEBI’s measures to tackle incorrect information in the market Premium

The regulator has proposed to lower disclosure thresholds which may materially impact a company’s operations. Further, companies may be granted reduced timelines to verify or refute market rumours

The story so far: Markets regulator Securities and Exchange Board of India (SEBI) on November 12 floated a consultation paper proposing measures to effectively tackle market rumours and reviewing disclosure requirements for material events and information under the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. The paper puts forth certain enhanced quantitative thresholds for disclosures from listed entities as well as revised timelines to respond to market rumours.

As per the regulator, the proposed measures endeavour to “keep pace with the changing market dynamics”. It adds, “In today’s digital age where information is readily available, it is expected that the listed entities adopt technology-based solutions for ease of compliance.” 

The central premise of the proposal is to ensure timely disclosure of significant events that may have a bearing on the price of a scrip. SEBI notes that while regulatory actions against non-disclosure of events doact as a deterrent for listed entities to withhold details of material events or information, timely disclosure is still very important. SEBI also seeks to ensure that unverified rumours do not shake investor confidence and affect decision-making. 

Listed entities too have sought that the regulator institute a certain uniformity in its guidance for disclosures, to help them better determine what constitutes a material event or information. 

In a related context, the markets regulator pointed to provisions that require companies to put forth specific and adequate replies to all rumour verification queries raised by the exchanges. This could be with respect to certain ‘information’ circulating on social media or any other platform. It proposes that entities, taking initiative, should confirm or deny any such reported event or information. 

The idea is to tackle ambiguity by provisioning room for relevant disclosures. Proposals include lowering disclosure thresholds and a better illustration of what constitutes a material event. 

SEBI proposes quantitative thresholds to replace the current process of assessment of the materiality of an event, which is done by the company’s board. Provisions which deal with disseminating information about the discontinuity or alteration of an event (or operation) as well as the urgent tackling of potentially noteworthy news (with implications in the present or future) remain unchanged.