To ensure “timely and adequate” disclosures, the Securities and Exchange Board of India (SEBI), on Tuesday, proposed a detailed set of norms for listed companies that require them to disclose price-sensitive information within a day along with the reasons for such developments.
The companies will have to explain the delay if such disclosures are not made in a day, SEBI said while giving an exhaustive list of developments that can be price-sensitive in nature.
Taking note of laxity in disclosures made by listed entities, the capital market watchdog has sought to define “material transactions” to make sure the price sensitive information are disseminated to stock exchanges on a timely basis.
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In its discussion paper, the market regulator has suggested that listed companies would have to inform stock exchanges about all events which are material in nature, price-sensitive and have bearing on overall business performance.
These disclosures need to be made within a day from the occurrence of the event. “In cases where the disclosures are made after one day, the listed entity shall, along with such disclosure provide suitable explanation for delay in making disclosure,” the paper said. Besides, firms are required to make periodic disclosures on the associated material developments till such time the matter is resolved.
“Liberal interpretations on what constitutes ‘materiality’ and whether to disclose the event/information to the stock exchanges taken by the listed entities have resulted in inadequate disclosure levels in the securities market.
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“Such liberal interpretations have also led to lack of uniformity in disclosures by various listed companies,” the paper said.
While noting that materiality has to be determined on a case-to-case basis, SEBI has suggested quantitative criteria calculated as a percentage of gross turnover.
The discussion paper on review of Clause 36 and related clauses of Equity Listing Agreement is open for public comments till September 12.