Concept of ‘Unaffected Price’ in framework for market rumor-verification introduced by SEBI

The Securities and Exchanges Board of India (Sebi) has issued new guidelines to facilitate ease of business, and protect stock prices from volatility due to the market rumors. 

The new guidelines have introduced the concept of ‘unaffected price’. SEBI’s concept of “unaffected price” refers to the share price level that would have appeared if there was no rumor in the market.

In the circular dated 21.05.2024, SEBI restated that listed companies are required to verify and respond to market rumors whenever stock price changes occur due to any rumors.

Source: SEBI

SEBI has mandated that from 1st June, 2024, the top 100 listed entities are required to verify the market rumors whenever there are material changes in stock prices based on rumors. The top 250 listed entities by market capitalization must also follow suit by 1st December, 2024.

Also Read :  Role of Securities and Exchange Board of India (SEBI) in Stock Market

Any market rumors through any form of media must be confirmed, denied or clarified by companies within 24 hours of dissemination of such rumors. In addition to this, the companies must provide regular insights of material developments until the event has been resolved. 

According to SEBI, ‘’The unaffected price shall be considered for transactions on which pricing norms specified by SEBI or the stock exchanges are applicable, provided that the rumor pertaining to such transaction has been confirmed within 24 hours from the trigger of material price movement.”