January 2023

SEBI Lays down Clearer Guidelines on What Constitutes ‘Misleading Information’

Jayant M. Thakur, Chartered Accountant


A recent SEBI Order on alleged misleading price-sensitive news by a journalist of a leading TV channel has wider ramifications. Not just news media but also companies, their senior executives, advisors of various forms and, more particularly in recent times, social media ‘influencers’ may need to consider the reasoning offered here. There is now even a word coined for this fast-growing group of social media influencers in investing – finfluencers (i.e. finance + influencers). While SEBI let off the journalist, and rightly so on the facts, the reasons provided for differentiating this case are noteworthy. Effectively, SEBI has laid down certain general principles on how communications to the public by various parties may be viewed. When would a person communicating to the public, in general, be said to have been misleading, acting fraudulently, acting recklessly, etc., to the point of becoming a violation of the law? The decision could help in answering these questions. And this would be relevant for persons including, say, the Chairman/CEO of a company (there is a case earlier where SEBI held him liable, only to find its Order reversed on appeal), the company secretary who communicates to the exchanges, various forms of advisors and ‘experts’ (registered with SEBI or not), etc.

The Order is also interesting since a core question raised was the constitutional guarantee of free speech, and it was claimed that the media had immunity from action. The Order considered several Court rulings in this regard.

Let us review this Order of SEBI and know what factors were deemed relevant to determine that the journalist concerned was not guilty. These factors should help determine how, another person could be found guilty on a different set of facts.


SEBIs Order dated 31st October, 2022, bearing reference No. Order/NH/VS/2022-23/20979, is briefly summarized. A leading business TV channel’s journalist reported to it on a price sensitive matter. She reported that the merger of a leading listed company was approved by the National Company Law Tribunal (NCLT). She was personally present at the hearing of the NCLT. On receiving the report, the channel immediately interviewed the company’s Chairman on the implications of the ‘merger order’. The Chairman gave replies though he first qualified that he had not seen the merger order.

Now, mergers, takeovers, etc., are generally treated as material and price-sensitive information. This is particularly so because, depending on various factors such as the condition of the company being merged, the exchange ratio, etc., there could be significant demand – or offloading – of the company’s shares, thus impacting the market price. Thus, various SEBI Regulations provide for special treatment of such material/price-sensitive information. The SEBI


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