C. Sri Lalitha Madhuri, ICFAI Law School
The Securities and Exchange Board of India (SEBI)[1] has recently introduced amendments to the Listing Obligations and Disclosure Requirements (LODR) Regulations, 2015, mandating listed entities to verify market rumors that lead to material price movements. While the intent to enhance market transparency and investor protection is laudable, the proposed framework raises significant concerns about its practicality, effectiveness, and potential unintended consequences.
Understanding the LODR Regulations and the Proposed Amendments
The LODR Regulations, a cornerstone of India's securities market regulatory framework, prescribe disclosure obligations for listed entities to ensure fair and transparent markets. The proposed amendments seek to strengthen these obligations by introducing a mandatory rumor verification mechanism.
Under the proposed framework, listed entities would be required to confirm, deny, or clarify any market rumor that results in a material price movement. The regulations define "material price movement" as a change in absolute stock price or a fluctuation in relation to a benchmark index exceeding specified thresholds.
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