SEBI issues framework to manage stock impact emerging from market rumours

As per a circular dated May 21, the stock market regulator's purpose of issuing the new framework is to exclude price disruption caused by rumours while arriving at the price for an acquisition.

SEBI will introduce a concept of unaffected price in order to mitigate the artificial stock price fluctuations, and the regulations will be applicable to the top 100 listed entities with effect from June 1, 2024, and on the next 150 entities beginning from December this year, reports said.

SEBI says the regulation requires the listed entity to verify market rumours once there has been a material price movement.

"Unaffected price shall be considered for transactions on which pricing norms specified by SEBI or the stock exchanges are applicable, provided the rumour pertaining to such transaction has been confirmed within 24 hours from the trigger of material price movement.," according to the SEBI circular.

Unaffected price implies the share price level that would have existed if there was no rumour in the market, as per SEBI.

"It has been specified that the unaffected price shall be considered by excluding the effect on the price of the equity shares of the listed entity due to the material price movement and confirmation of the rumour," SEBI's circular read.