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SEBI Moots Stringent Norms for Timely, Adequate Disclosures
Aug 27, 2014

Market regulator SEBI recently proposed a detailed set of norms for listed companies that require them to disclose price sensitive information within a day along with the reasons for such developments. The companies will have to explain the delay if such disclosures are not made in a day.

In another significant suggestion, the regulator has also proposed that all listed companies should intimate within 15 minutes of closure of the board meetings about decisions on dividends, bonus, fund raising and buyback, among others. The move is part of SEBI's effort to ensure timely and adequate disclosures by listed companies.

Taking note of laxity in disclosures made by listed entities, the capital market watchdog has sought to define material transactions to make sure the price sensitive information are disseminated to stock exchanges on a timely basis.

In its discussion paper, the SEBI has suggested that listed companies would have to inform stock exchanges about all events which are material in nature, price sensitive and have bearing on overall business performance.

These disclosures need to be made within a day from the occurrence of the event. These include information with respect to its unlisted subsidiaries. In cases where the disclosures are made after one day, listed entity shall, along with such disclosure provide suitable explanation for delay in making disclosure.

In case of appointment of a director, the company is also required to disclose relationships between directors (if any) within one day of appointment. While noting that materiality has to be determined on a case to case basis, Sebi has suggested a quantitative criteria calculated as a percentage of gross turnover.

As per the paper, any information that could influence investor decisions such as those that have an impact on a company's assets and liabilities and financial condition could be considered as price sensitive.

In case of restructuring, the company has to provide details and reasons as well as the overall impact to the exchanges. With regard to securities or derivatives that are listed overseas, SEBI has proposed that disclosures about them should be simultaneously on the concerned Indian as well as foreign bourses.

The quality of disclosures that are currently being made by the listed entities under the existing provisions, also points to the need for detailed rules governing continuous disclosures. Continuous, adequate, accurate and timely disclosure of information on an ongoing basis would achieve parity while enabling investors to make informed investment decisions.


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