Before the amendment in SEBI (Listing Obligations and Disclosure Requirements) Regulations, its provisions provided a broad framework for their applicability to listed entities, considering various designated securities on recognized stock exchanges. However, a recent amendment dated 17th May 2024 has brought significant changes. Here’s a breakdown:

Method of Determination: Recognized stock exchanges are now mandated to prepare a list of entities ranked by average market capitalization from 1st July to 31st December each year. 

Compliance based on List: Listed entities must comply with relevant provisions based on the list prepared by recognized stock exchanges.

Timing of Applicability: The relevant provisions become applicable to listed entities three months after 31st December or from the beginning of the immediate next financial year, whichever is later.

Ceasing of Applicability: If a listed entity remains outside the applicable threshold for three consecutive years, provisions based on market capitalization cease to apply.

Enhancing Disclosure Mechanisms: Regulation 30 of LODR, governing disclosure requirements for listed entities, has undergone significant modifications, particularly in sub-regulation (11) dealing with rumour verification. The amendments aim to refine and enhance the disclosure framework, ensuring transparency and accuracy in information dissemination. Key highlights include –

Refined Confirmation Process:

• If there is a Material Price Movement (MPM), the company will have to search for “rumour” in mainstream media.
• Further, the company shall either confirm that rumour or deny it.
• Confirmation or denial shall be made within 24 hours of the trigger of MPM.
• Since MPM would be assessed regularly, listed companies not only have to be on alert continuously but also adapt technologies to run apace with the new framework.

Prompt Response Mandate: Introduction of sub-regulation (11A) requiring timely responses from key individuals within listed entities to queries or explanations sought, enhancing regulatory compliance and investor confidence.

Pricing based on Unaffected Price: The effect on the price of the equity shares of the listed entity due to MPM and confirmation of the reported information has to be excluded for calculation of the unaffected price for that transaction.

A spurt of Swift Regulations on Pricing: Without taking much time, SEBI, in the recent Circular dated 21 May 2024 on the framework for considering unaffected prices for transactions post-confirmation of market rumours, marks a significant milestone. Here’s a brief overview –

Applicability Timeline: Becomes applicable to the top 100 listed entities from 1st June 2024 and the top 250 from 1st December 2024, streamlining compliance and transition processes.

Calculation Methodology for Unaffected Price: Illustrations for calculating Volume Weighted Average Price (VWAP) in the circular facilitate a clear understanding and implementation across transactions (using adjusted VWAP by excluding price variations caused by rumours).

These swift regulatory developments underscore the vitality of listed entities’ timely, accurate disclosures and the sanitization of information in the security markets.

Stay updated and compliant with these evolving regulations!