Concerned over large-scale discrepancies in mandatory disclosures by listed firms, the Securities and Exchange Board of India, on Monday, tightened its regulations in this regard, and asked bourses to put in place a stronger mechanism with additional manpower to monitor adequacy and accuracy of such disclosures.
The companies would also have to provide the details of their promoters, directors and/or key management personnel, who would be held responsible for ensuring compliance with the disclosure norms.
Stock exchanges have been asked to publish these details on their websites in case of defaults.
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SEBI has also asked the stock exchanges to set up a separate monitoring cell with identified personnel to ensure compliance with the new norms.
The stock exchanges, which act as front-line regulator for listed companies, have been asked to “keep themselves informed of the updates in various media, including print and mass media, with respect to a listed company.”
The bourses will scrutinise the disclosures and ensure that no important information has been omitted by the company.
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It has been often found that key business developments first appear in the media and later in the company’s regulatory filings by the companies.
Non-compliance to attract fine
Issuing detailed guidelines on corporate disclosures, which are governed by the Listing Agreement signed by the listed firms with the stock exchanges, SEBI said the stock exchanges would take appropriate actions, including levying of fine on the companies in case of non-compliance.
The 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.
While provisions in the existing regulations also require listed companies to file disclosure reports with stock exchanges about every key information and developments, the new norms have been put in place for more effective implementation and compliance at the end of stock exchanges as well as the companies.
“Concerns have been raised that even though listed companies make disclosures to Stock Exchanges within the timeframe stipulated under the Listing Agreement; the contents of the disclosures made by such companies are not adequate and accurate. Therefore, investors are unable to take informed investment decisions based on such disclosures,” SEBI said.
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.
SEBI asked stock exchanges to “treat inadequacy and inaccuracy of disclosure as non-compliance, wherever applicable.”
It also asked bourses to follow up with the listed companies at every stage for the updates on material events reported, either suo moto or upon receipt of information from other sources.
In case there is any deficiency in the information or clarification provided by the listed company, bourses are required to seek further information or clarification from the firm within two working days.