Sebi working on related-party transaction norms: Tyagi

Ajay Tyagi, chairman of Securities and Exchange Board of India (SEBI). (PTI file photo)

The capital markets watchdog Sebi is looking at improving the norms governing related-party transactions for companies, according to the chairman.

In the comments that come weeks after the latest Infosys episode, Sebi chairman Ajay Tyagi on Wednesday said it is "impossible" for the regulator to list out what can be "material" information which it should be mandated to share.

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

"Sebi is looking at improving the existing norms on related-party transactions," Tyagi said at an OECD seminar on corporate governance organised by the Sebi.

He explained the increasing prevalence and use of group companies has brought several governance issues to the fore, especially on 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.

Tyagi said Sebi has given its inputs on regulations as a case study on the subject to the OECD and affirmed further support on the same.

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

But 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 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.

Protection of minority shareholders' rights is a crucial element for the regulator, but the minority shareholders shouldn't abuse the rights vested under the statutes, Tyagi appealed.

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.

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