SEBI Introduces New Framework For Unaffected Price

08.06.2024

SEBI Introduces New Framework For Unaffected Price

Why in the news?                        

To tackle any impact on the price of scrip because of a market rumour, the Securities and Exchange Board of India (SEBI) introduced a framework centered around its ‘unaffected price.’

About New Framework:

• The Securities and Exchange Board of India (SEBI) introduced a framework centered around the concept of "unaffected price" to tackle the impact of market rumours on stock prices.
• Purpose: The framework aims to maintain a reasonable price for a scrip, excluding any undesired influence before the rumour is confirmed or refuted, thereby helping both companies and investors.
• Implementation: The framework will be implemented in phases:

○Phase 1 (June 1): Applies to the top 100 listed entities.

○Phase 2 (December 1): Applies to the top 250 listed entities.

• How "Unaffected Price" works: The "unaffected price" is the price of the script before a particular rumour emerged and became public. This mechanism ensures a fair price discovery process, protecting the interests of market participants.
• Benefits: The framework is expected to:

○ Improve market integrity by promoting transparency and faster responses from listed companies.

○ Enhance confidence among investors.

○ Reduce speculative activity.

○ Ensure a level playing field for buybacks, mergers and acquisitions, and other transactions.

• Timeframe: The "unaffected price" must be determined within 24 hours of any material price movement excluding the rumour.

                                                       Source: The Hindu

Ques :- Consider the following statements with reference to the New Framework For Unaffected Price:

Statement-I

 It was introduced by the Reserve Bank of India (RBI).

Statement-II

 It aims to maintain a reasonable price for a scrip, excluding any undesired influence before the rumour is confirmed or refuted.

Which one of the following is correct in respect of the above statements?

1. Both Statement-I and Statement-II are correct, and Statement-II is the correct explanation for Statement-I.
2. Both Statement-I and Statement-II are correct, and Statement-II is not the correct explanation for Statement-I.
3. Statement-I is correct, but Statement-II is incorrect.
4. Statement-I is incorrect, but Statement-II is correct.

Answer D