Sebi likely to relax new disclosure norms around rumour verification

Legal experts said that as such disclosures will have a bearing on stock prices there is a need for tweaks in regulations addressing fraudulent trade practices

The Securities and Exchange Board of India (Sebi) might relax the disclosure norms around rumour verification to help smooth implementation and ease compliance amid pushback from India Inc, said people in the know.
 

The rule has been notified following amendments to the Listing Obligations and Disclosure Requirements (LODR) by Sebi. However, its implementation has been deferred until February. In the meantime, a forum comprising industry bodies, exchanges, legal experts, and regulatory officials is in a huddle to understand the challenges around it and formulate a process for its easier implementation.
 

“The feedback Sebi has got is that there could be some unintended fallout if the norms are implemented. As a result, some modifications will have to be made to this disclosure framework or another Sebi regulation,” said a regulatory source.

As such disclosures will have a bearing on stock prices, legal experts said there was a need for tweaks in regulations addressing fraudulent trade practices. 

But the RBI infused Rs 59,260 crore and Rs 1.5 trillion on Friday and Sunday, respectively. The banking system liquidity deficit widened to a near five-year high on November 21 on the back of monthly goods and services tax payments; the central bank had infused Rs 1.74 trillion on that day.
 

“The RBI has been clear about the fact that liquidity was on an extremely much tighter side given the outflows on account of GST and other factors. This month will see the ending of a quarter. Most quarter endings generally see liquidity on the tighter side.

That’s the reason they (RBI) provided the VRR auction, which has eased liquidity to a certain extent. But given that it is just a seven-day instrument that they have given, this necessarily means that they are also expecting that liquidity will improve once the government spending comes in,” said Indranil Pan, chief economist at YES Bank.

Against the notified amount of Rs 1 trillion, the RBI received bids worth Rs 2.7 trillion at the 7-day VRR auction – the first in six months. Banks borrowed the amount at a weighted average rate of 6.63 per cent. Significant demand was also fuelled by elevated call rates and tri-party repo (Trep) rates in the market, dealers said. Earlier, the central bank conducted a VRR auction on June 19.

The market expects that the central bank will abstain from conducting open market operations (OMO) of bond sales in the near term. However, if and when foreign inflows into bonds materialise, the central bank can utilize OMOs as a tool to manage liquidity, absorbing excess funds in the system.

“The market is not thinking about OMO right now, because the RBI governor made it clear that they (the central bank) would use the tool only to deal with liquidity, and given the current scenario, OMO is out of the question,” said the treasury head at a private bank.

The RBI has been conducting variable rate reverse repo (VRRR) auctions for the past six months to withdraw excess liquidity from the system. However, banks remained reluctant to participate in these VRRR auctions given the tight liquidity situation.

Need for clarity

• Industry forum, chaired by KV Kamath, working on recommendations regarding standards for compliance
• Industry flagged challenges in implementation with respect to premature deal disclosures, misleading statements
• Stages at which such a confirmation or denial is required need to be defined, say legal experts
• Experts apprehend potential clash between disclosure requirement and Sebi’s FUTP Regulation