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SEBI Regulations to Tackle Market Rumours

Need of SEBI Regulation

  • To ensure that unverified rumours do not shake investor confidence and affect decision-making.
  • To ensure timely disclosure of significant material events or information.
  • Uniformity for disclosures by listed entities, to help them better determine what constitutes a material event or information.
  • It is done under SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.
  • To keep pace with the changing market dynamics.
    • In the age of readily available information, it is expected that the listed entities adopt technology-based solutions for ease of compliance.

 

Highlights of SEBI Regulation

  • Goal: To tackle ambiguity by provisioning room for relevant disclosures.
  • Proposed Revisions In Materiality Thresholds:
    • 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.
    • Listed entities should disclose all events or information whose threshold value or expected impact in terms of value exceeds 2% of either its turnover or net-worth as per the last audited standalone financial statement, or 5% of the three-year average of absolute value of profit/loss after tax as per the last three audited standalone financial statements of the entity.
    • Companies should disclose their loan agreements as a lender and not just as a borrower
  • Proposed Disclosures:
    • They are directed towards preventing any false market sentiment or impact on the securities of a company.
    • Top 250 listed entities, based on market capitalisation at the end of the previous assessment year, would have to clearly deny or refute such rumours.
    • Companies need to disclose any actions initiated by a regulatory, statutory, enforcement or judicial authority against any of its directors, key managerial personnel, promoter or subsidiary in relation to the entity.
    • It include lowering disclosure thresholds and a better illustration of what constitutes a material event.
  • Timeline For Disclosure
    • SEBI proposes that disclosures relating to events or information originating from within the company be made within twelve hours instead of the existing mandate of twenty-four hours.
    • SEBI proposes revising the 5% threshold to 2% for companies to disclose acquiring shares or voting rights in a company.
    • It proposes giving 12 hours for the disclosure of all such transactions.

 

Securities and Exchange Board of India (SEBI)

  • It is India’s securities and commodity market regulator, reporting to the Ministry of Finance of the Indian government.
  • It is a statutory body formed under SEBI Act of 1992.
  • SEBI is a quasi-legislative and quasi-judicial body which can draft regulations, conduct inquiries, pass rulings and impose penalties.
  • It functions to fulfill the requirements of three categories –
    • Issuers – By providing a marketplace in which the issuers can increase their finance.
    • Investors – By ensuring safety and supply of precise and accurate information.
    • Intermediaries – By enabling a competitive professional market for intermediaries.

UPSC Mains Result 2022

 

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