SEBI Considers Changing Rumour Verification Process

The Securities and Exchange Board of India has proposed a new approach to verify rumours in the stock market.

Currently, under Regulation 30, rumours linked to specific material events or information needs to be verified within 24 hours of being reported in the mainstream media.

A consultation paper, developed after discussions with industry experts, suggested a shift. Instead of waiting for media reports, SEBI proposes verifying rumours within 24 hours of a significant price change, focusing on material price changes.

Starting from Feb. 1, 2024, the new rumour verification rules will apply first to the top 100 companies listed on the stock market. Then, from Aug. 1, 2024, the same rule will extend to the next top 250 listed companies.

Two frameworks have been suggested for verification. Framework ‘A’ suggests considering the price from the day before the company confirms the rumour to determine transaction pricing, ignoring subsequent market changes.

Framework ‘B’ suggests excluding the price variation due to the rumour and its confirmation from the Volume Weighted Average Price calculation and adjusting VWAP based on daily prices. Both frameworks aim to ensure fair pricing while acknowledging challenges.

Comments are sought on the suggestions by Jan. 18.

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