Listed firms must disclose their board decisions within 30 minutes, while all other ‘material information’ would need to be made public within 24 hours, Sebi said today as it tightened its corporate disclosure norms and warned of strong penal action for non-compliance.
These disclosures would need to be made “as soon as reasonably practicable”, but not later than the given time limit, Sebi said.
The information, including about material events, would need to be mandatorily disclosed through stock exchange platforms for the benefit of investors, while the companies would have to provide “specific and adequate reply” to queries with respect to rumours and media reports.
Such information would include also those related to ‘material’ subsidiaries, while Sebi would also issue an “indicative list of information which may be disclosed upon occurrence of an event,” the regulator said.
The new disclosure requirements are aimed at checking a widespread practice among the Indian companies of selectively leaking the information, including through media and without informing the investors first, for personal gains by promoters and management by way of inflating the valuations in the stock market and before merger and acquisition deals.
The companies would also need to disclose all such information on their websites and they would need to be kept there for a minimum period of five years, while all the disclosures need to be updated on a regular basis.
To bring in these changes, which puts the disclosure requirements in India at par with many developed markets, Sebi’s board today approved changes in its proposed SEBI (Listing Obligations and Disclosure Requirements) Regulations.
Announcing the new norms, Sebi Chairman U K Sinha told reporters that the regulator is strictly monitoring the compliance of disclosure or listing guidelines, which are now being converted into regulations for better compliance.
Earlier in a discussion paper floated in August 2014, Sebi had proposed intimation about decisions taken in board meetings within 15 minutes.
The Sebi chief said companies are already being issued warning letters and penalised for non-compliance to the existing disclosure norms.
“For example, if quarterly disclosures are not made in time, we are issuing warning letters, we are penalising them and we have authorised stock exchanges to penalise them.
“We are now also into monitoring of quality of disclosures. We have got a team here and we have enhanced the team in the stock exchanges. So, basically the feeling earlier was that while these guidelines were there, nobody was monitoring that.
“What I am trying to tell is that we are very serious about monitoring the (implementation of these) guidelines. Today’s decision is to further clarify some points which will be included in our listing regulations,” he said.
Sebi board had earlier decided that disclosure guidelines or listing guidelines will be changed into disclosure regulations, which provide for stricter penal actions.
“We are already working on that. We will be doing it very soon. So before that, we have decided that what must be disclosed, and within what time frame, within how many minutes of the incident, it should be disclosed.
“These things needed to be elaborated, so that we include them in our regulations,” he said.
The new norms would prescribe what is a material development and who decides what is material, Sinha said, while adding that the “whole idea is that the investor, the shareholder community should be given complete information about anything material with regard to a company”.
Sebi said it has reviewed the requirements pertaining to disclosures being made by the listed entities on a continuous basis with a view to enable the investors to make well-informed investment decisions.
As per the changes approved by the Sebi Board, “the listed entity shall make the disclosure of all events/information, first to stock exchanges, as soon as reasonably practicable and not later than 24 hours of occurrence of event/ information.
“Disclosure of outcome of board meetings shall be made within 30 minutes of the closure of the meeting of Board of Directors.
“In addition to current requirement of making disclosure at the time of occurrence and after the cessation of the event, updation of disclosure on material developments shall also be made on a regular basis till such time the event/ information is resolved/closed with explanations wherever necessary,” the regulator said.
Besides replying to queries raised by the stock exchanges, the listed companies can “confirm or deny any reported information” on its own initiative also.
Sebi has also listed out a criteria for the companies to determine whether a particular event/information is material.
These would include an event or information, which is likely to result in discontinuity or alteration of information already available publicly, or may result in significant market reaction if such an omission comes to light later.
The information would also be considered material if opined so by the company’s board, which would also have to frame a policy for determination of materiality. This policy would also need to be disclosed on the company’s website.
The companies would need to rationalise, consolidate, enhance and categorise its existing list of events into two parts — events which are by nature material that is those that necessarily require disclosure without any discretion by the listed entity, and events which shall be construed to be material based on application of the new guidelines for materiality.
Sebi to tap social media; plans crowdsourcing, start-up norms
Tasked with greater powers and gearing up for a larger role, markets regulator Sebi today said it is framing new norms to help young entrepreneurs raise funds through crowdsourcing and listing of start-ups, while it plans to tap social media in a big way to help investors.
Besides, the regulator would further streamline its enforcement process to ensure uniformity in its approach and improve the efficiency of its enforcement proceedings across the organisation.
The initiatives lined up for the next fiscal also include an “extensive and integrated use of technology to facilitate and further ease the investing process in the securities markets through measures like e-IPO and Aadhar-based e-KYC”.
Sebi said it would take proactive steps to meet the “aspirations of young entrepreneurs and cater to the financing and listing needs of start-ups with measures like Institutional Trading Platform (ITP), crowd-funding etc or a separate carve out for them in the ICDR (Issue of Capital and Disclosure Requirements) Regulations”.
Sebi would also enhance significantly its investor education and awareness efforts through collaboration with other agencies and through empanelment of more Resource Persons and would tap the increasing stature of social media for enhancing investor awareness an education, the regulator said.
It would also enhance the experience and interface of investors and other stakeholders through upgradation of Sebi website.
These are part of Sebi’s proposed policy initiatives in the next fiscal 2015-16, which were approved by the regulator’s board today along with its budget for the year.
Sebi is working on a new roadmap to attract larger number of retail investors towards capital markets, develop a vibrant bond market and create a unified regulatory regime for all segments of derivatives, including commodities.
This assumes significance in the backdrop of government setting an ambitious USD 10 billion disinvestment target for the next fiscal, beginning next month, with plans to give a larger pie of shares in state-run companies to the public shareholders rather than largely depending on institutions, including from overseas and within the country.
The new roadmap, to be framed in consultation with the government and other stakeholders, follows proposals made by Finance Minister Arun Jaitley in the Union Budget, including those about the merger of commodities market regulator FMC (Forward Markets Commission) with the Securities and Exchange Board of India (Sebi) to create a unified markets regulator.
Besides, Finance Bill 2015 has also proposed ‘securities’ to be taken out of the regulatory ambit of banking regulator RBI and the move is being seen in line with an overall thinking that Sebi should be made the comprehensive regulator for all kinds of securities without any regulatory overlaps.