SEBI had previously mandated that listed entities must confirm, deny, or clarify market rumors to the mainstream media. This directive was introduced through an amendment to Regulation 30(11) of SEBI (LODR) Regulation, 2015, with an initial effective date of October 01, 2023, for India’s top 100 listed entities based on market capitalization. It was set to extend to the top 250 listed entities from April 01, 2024.
However, in a recent circular issued by SEBI, the implementation deadlines have been extended. For the top 100 listed entities by market capitalization, the new deadline is February 1, 2024, while for the top 250 listed entities, it is now August 1, 2024.
The amendment to SEBI (LODR) Regulation, 2015, originated from a proposal approved at the SEBI Board Meeting held on March 29, 2023. A consultation paper was released by SEBI on November 12, 2022, before presenting the proposal at the SEBI Board Meeting.
SEBI received 71 comments on the consultation paper, with 52 expressing dissent regarding the mandatory requirement. Dissenting commentators cited examples of challenges, particularly in cases involving acquisition deals and the rumors surrounding them. SEBI, in response, referenced regulatory requirements in other developed foreign securities markets to justify its steps. SEBI emphasized the importance of preventing the creation of false market sentiment and its adverse impact on the market price of listed entities.
For more details, the full SEBI Board Meeting Agenda can be accessed through this link: https://www.sebi.gov.in/sebi_data/meetingfiles/apr-2023/1681703089597_1.pdf
A copy of the SEBI Circular extending the timeline for verifying market rumors by listed entities is enclosed.
The existence of stock markets hinges on diverse information and, to some extent, speculation. However, the challenge of combating false information, the influence of social media in disseminating fake news, and the associated risks to free speech and misinformation is a complex issue. It raises questions about whether freedom of speech permits the dissemination of rumors, the creation of fake news, and the exaggeration of information in the media.
On the other hand, trolls, anonymity, and speculation are often considered facets of freedom of speech and expression. The key question here is whether the recent amendment to the SEBI (LODR) might be perceived as an attempt to misuse the regulatory system to restrict freedom of speech and expression, particularly within the realm of the press and media. Also, does it create an unreasonable burden on the listed companies to comply with something that they can not control?
Readers are encouraged to share their views with Regstreet Law Advisors at info@regstreetlaw.com.