Sebi to review related party transactions

Mumbai: The capital markets regulator Sebi is looking at improving rules governing related-party transactions for companies.

Sebi Chairman Ajay Tyagi said compliance to the corporate governance should be on a principled basis and not merely from a "tick-mark" perspective where a company only looks at mandated requirements.

In the light of the probe into the latest Infosys whistleblower case that came to light early this month, and without mentioning naming any company, he said it is impossible to decide what is material information and therefore, it is better to leave to companies to decide on the same.

"Sebi is looking at improving the existing norms on related-party transactions," Tyagi said at an event here.

However, he said lack of disclosures is  a "very serious issue" and overlooking any aspect can erode investor wealth.

He also cited the independence of independent directors, especially in companies that are promoter-driven as a regulatory concern.

He also said further growth of capital markets is essential given the country's growth needs and exhorted the industry to do all it can.

Some listed companies, especially due to their family-driven nature, have been found to be wanting on the related-party transactions.

“Use of complicated group structures and complex related-party transactions increase the concern on siphoning of funds, money laundering, round tripping etc, while such structures and transactions happen at a cross-country level, the lack of free information flow hinders monitoring and enforcement as well,” he said.