Sebi tightens disclosure norms ahead of polls

Sebi tightens disclosure norms ahead of polls

Sebi tightens disclosure norms ahead of polls

Fearing that companies may divert funds from their business for funding elections without the knowledge of investors, capital market regulator Sebi has enhanced its surveillance against channelising illicit funds through capital markets or investment schemes for polls.

Sebi has tightened corporate disclosure norms requiring listed companies and stock exchanges to be more vigilant about companies informing their shareholders about any key business developments.

While market intermediaries, including brokers, are not allowed to divert their clients' money without authorisation, listed firms are also supposed to utilise the money collected from investors for their specified business purposes.

Besides, companies are also required to inform the investors for any utilisation of funds generated by running their respective businesses and any digression from these regulatory requirements would be dealt with appropriately.

Any business transaction that raises suspicion of investors being cheated or funds being diverted to related entities will also go under the scanner, an official said.
Through regular inspections, Sebi is keeping watch on compliance with norms regarding Anti-money Laundering, settlement of client accounts on a timely basis, segregation of clients and proprietary funds and KYC norms.

It is mandatory for market intermediaries to identify and verify the beneficial owner of funds, as part of Sebi's efforts to tackle the risk presented by the misuse of complex legal structures, such as, companies, partnerships, trusts, etc, to facilitate money laundering or terror financing.

A greater use of technology and communication channels in financial markets has increased the risk of money laundering activities, but the regulatory authorities have also adopted latest and modern surveillance tools to tackle these challenges, the official said.

The general elections are scheduled to begin in April and sources said indications are that many entities running illicit money-pooling schemes have lined up huge redemptions from fictitious investor accounts in the coming weeks.