Top 100 cos to verify market rumours promptly starting Jun 1

The top 100 listed companies by market capitalization will have to confirm or deny any market rumour reported in the mainstream media from this Saturday.

The rule will be applicable for top 250 companies from December 1.

Under the Sebi’s rule, these companies will have to ‘confirm, deny, or clarify any reported event or information in the mainstream media that is not general in nature and that indicates that rumours of an impending specific material event’ are circulating amongst the investing public within 24 hours from the reporting of the information.

Sebi through its newly introduced rumour verification framework has excluded the price volatility in arriving at average market price for the purpose of corporate actions in a bid to make it fair for all investors at large.

”The move would dissuade leaking of information that would affect the valuation in the given corporation action. This initiative of Sebi would help strengthen the rumour verification framework. It would help in achieving a fair market thereby making it a preferred market for investors all over the world,” Makarand M Joshi, founder, MMJC and Associates, a corporate compliance firm, said.

While calculating the price for various corporate actions such as buyback through book building, buyback through stock exchange, qualified institutional placement, preferential allotment, takeovers, effect on shares price due to material price movement and confirmation of reported event or information can be excluded.

It means that while calculating price for corporate actions the period during which material price movement was seen in the stock due to confirmed rumours would be excluded.

Market rumours pertaining to a company’s business can create significant volatility in stock prices, often leading to transactions that don’t reflect a company’s true value. This market rumours could be related to anything, including exiting of top management, cancellation of an order and financial health.

”Sebi’s framework addresses this issue by establishing a mechanism to determine the unaffected price — the price of a stock before the rumour surfaced. This price would be used for transactions unless the rumour itself caused price fluctuations in subsequent trading days,” Trivesh, Chief Operating Officer of Tradejini, had said.