India’s leading listed companies are bracing for fresh compliance burden in the wake of a directive from Securities and Exchange Board of India (Sebi), which mandated a confirmation or denial of market rumours.
The proposal, which was approved at the regulator’s recent board meeting on 29 March, mandates listed companies to verify market rumours pertaining to their operations, as was reported across various media outlets, and disclose the veracity of the news.
The framework will be applicable to the top 100 companies by market capitalization starting 1 October, and will apply to the top 250 firms from 1 April 2024.
Legal experts said this new rule will significantly increase the disclosure burden on listed companies, as they will be obligated to offer clarifications on a wide range of market rumours. Furthermore, the firms may find themselves in precarious situations if a rumour pertains to any ongoing deals.
There have been instances where news regarding ongoing deals are prematurely leaked, even during the initial stages of negotiations, experts said. Consequently, Sebi regulations may compel firms to prematurely disclose developments.
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