Indian market regulator fines Reliance for not properly disclosing Facebook deal

Reliance and two of its officers were fined by India's market regulators for failing to properly disclose Facebook's investment into the company.

The shares of the group company rose after the media reported about the pending deal. The Financial Times broke the news in March that Meta, then called Facebook, was in advanced stages of talks to make multi-billion investment in Reliance's digital unit. Several outlets quickly reported the news.

When Reliance learned that the information was going to be published, it was incumbent on them to give due clarification through the stock exchanges.

The market regulator said that information that the company wanted to keep secret until made public failed in that goal. The company abdicated its responsibility to verify and come clean on the unverified information that was floating around when the bits of Unpublished Price-Sensitive Information were made available.

Reliance did not comment to Financial Times and other outlets at the time, which may suggest that it did not have enough time to assess how it should respond. It is not clear how much time a company needs before it can make a statement. A few hours is usually enough for a small announcement. I think a business day is enough for a deal like that.

The market regulator doesn't think that's true.

Due to the fact that the agreement was yet to be approved by the Board of the Company and that it was not yet final, noticees were not able to clarify the rumour on their own. It's hard to be sure that the company would respond to rumors only after the transaction is complete.

There are a lot of announcements on the stock exchanges where only the Memorandum of Understanding has been entered, or where the term sheet has been signed.

Reliance and its compliance officers are fined a small amount. Reliance and its officers have denied the allegations, according to the market regulators.

A good overview of how the two companies put together an investment can be found in the notice. On September 1, Facebook and Reliance started discussing a potential transaction. A team from Facebook visited Reliance's offices. Reliance executives went to Facebook's headquarters. Morgan Stanley arrived on the scene in January. The terms of the deal were being negotiated.