Sebi to tighten information disclosure norms

Aimed at curbing companies going to media first with business plans

Sebi may tighten norms related to mandatory disclosure of price-sensitive information by listed companies, amid an emerging trend of key business developments being announced outside the regulatory framework, especially to the media.

Sebi headquartersBesides expanding the existing list of ‘price sensitive information’, Sebi (Securities & Exchange Board of India) would also look at making its guidelines more specific in this regard, a senior official said.

The existing guidelines provide mostly a generic set of disclosures required to be made by the listing companies and are contained in the ‘Listing Agreement’ they sign with the stock exchanges.

Besides information on financial results and shareholding patterns, Clause 36 of the Agreement lists six categories of ‘price sensitive information’ required to be disclosed by the companies, while there is an additional category of ‘any other information’ having bearing on operations and share prices.

Some of the key business events like announcements of periodic sales figures and other performance metrics by the companies, mostly in consumer-focused industries like auto, cement, real estate and aviation, are not covered specifically under the existing guidelines, although many companies disclose them on the stock exchanges. Sebi is also concerned about companies mostly preferring the media for making public some of their key business developments while the stock exchanges are intimated about these matters only later and, in some cases, not at all, the official said.

He noted, however, that the companies might not be held responsible for this practice as the Agreement does not specifically mandate the use of stock exchange platform for making public quite a number of price-sensitive developments.

Removing anomaly

The regulator would look at removing this anomaly, while expanding the list of mandatory disclosures. In the past few months, the stock exchanges have stepped up issuing notices and seeking clarifications from the listed companies with regard to the media reports on them, as also after irregular movements in their share price, or volumes.

Since the beginning of this year, about 15 companies have been issued notices about some key developments appearing in the media but not being reported to stock exchanges, while a similar number of clarifications have been sought for sudden changes in stock prices and/or trading volumes. During 2011, bourses had sought similar clarifications from over 200 companies.

While stock exchanges seek these clarifications as per their role of front-line regulators, they are forwarded to Sebi for necessary actions, wherever required.

Sebi has noticed that companies generally tend to reply that they have complied with all the clauses of the Agreement and any ‘price sensitive information’ required as per the guidelines, have been duly shared by them.

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