Sebi moots stringent norms for timely, adequate disclosures

Mumbai: To ensure "timely and adequate" disclosures, Sebi on August 19 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, Sebi said while giving an exhaustive list of developments that can be price sensitive in nature.

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 Securities and Exchange Board of India (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 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," the paper said.

Besides, firms are required to make periodic disclosures on the associated material developments till such time the matter is resolved. "Liberal interpretations, on what constitutes 'materiality' and whether to disclose the event/information to the stock exchanges, taken by listed entities has resulted in inadequate disclosure levels in the securities market. "Such liberal interpretations have also led to lack of uniformity in disclosures by various listed companies," the paper said.

According to the paper, a listed company should explain and give reason for change in key managerial personnel, including in instances of resignation. 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. The discussion paper on review of clause 36 and related clauses of Equity Listing Agreement is open for public comments till September 12.