In a development that could encourage quick disclosures from companies, the Securities and Exchange Board of India (Sebi) issued guidelines on Tuesday for mitigating the impact on stock prices due to market rumours. This will be facilitated through a new concept of ‘unaffected price’.
The regulations require a listed entity to confirm, deny, or clarify any media reported information that leads to a ‘material price’ movement of the shares. The stock exchanges will issue the framework for material price movements on their websites.
The rule will take effect in a phased manner, with it being applicable to the top 100 listed entities by market value from June 1, followed by the next 150 entities from December 1.
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Further, if such news is confirmed by the entity within 24 hours, the effect of such news on stock prices will be excluded while computing the volume-weighted average price, which is used to calculate a stock’s average price over a period, factoring in the volume traded. Sebi has introduced using the “unaffected price” for such calculations.
When sensitive information or a rumour leaks in the media before the formal announcement by a company, it often leads to a surge or plunge in the company’s stock price. This affects the volume-adjusted stock price for the purpose of fresh share offerings, pricing for preferential issues, open offers, and several other transactions.
“Unaffected price shall be considered for transactions on which pricing norms specified by Sebi or the stock exchanges are applicable, provided that the rumour pertaining to such transaction has been confirmed within 24 hours from the trigger of material price movement,” Sebi said.
Sebi aims to exclude the false inflation or deflation of stock prices, caused by rumours from any such critical financial transactions. Unaffected price implies the share price level that would have existed if there was no such rumour in the market.
The modified calculation of volume-adjusted stock price will be used from the day the material price movement begins, until the rumour is confirmed and slightly beyond. The unaffected price can be used for a period of 60 days or 180 days, as applicable based on the stage of transaction, from the date of confirmation of the market rumour till the relevant date under the existing regulations.Come from Sports betting site
