Sebi wields the baton, tightens corporate disclosure norms

The Securities and Exchange Board of India (Sebi) has directed stock exchanges to put in place a stronger mechanism with additional manpower to monitor adequacy and accuracy of mandatory disclosures by listed companies as part of its new rules.

Hundreds of companies have been found to have failed in making adequate and accurate disclosures even in routine filings like financial results, shareholding patterns and corporate governance reports. Therefore, investors are unable to take informed investment decisions based on such disclosures, the market regulator said.

Under the new norms, companies would have to provide details of their promoters, directors and key management personnel, who would be held responsible for ensuring compliance with the disclosure rules while stock exchanges have been asked to publish these details on their websites in case of default.

Sebi has also asked stock exchanges to set up a separate monitoring cell with identified personnel to ensure compliance with the new norms. These corporate disclosures are governed by the listing agreement signed by companies with stock exchanges but are not being enforced strictly.

According to the new Sebi guidelines, stock exchanges would take appropriate action, including levying of fine on the companies in case of non-compliance.

Stock exchanges, who act as front-line regulator for listed companies, have also been asked to keep themselves informed of the updates in the media with respect to a listed company.

Bourses will scrutinise the disclosures and ensure that no important information has been omitted by the company. It has been often found that key business developments first appear in the media and later in company's regulatory filings.

Bourses would also submit to Sebi an "exception report" in addition to the existing reporting requirements with the details of companies which do not respond to the clarifications sought by them and/ or where the response submitted by the company is not satisfactory.

In association with Mail Today