At Board meeting: Sebi defers norms for loan default disclosure by listed companies

Cross-holding in rating firms capped at 10%; Stock, commodity to trade on single exchange from October.

By: ENS Economic Bureau | Mumbai | Published: December 29, 2017 5:06:28 am
Sebi chairman Ajay Tyagi in Mumbai. (Express Photo: Janak Rathod)

The Securities and Exchange Board of India (Sebi) on Thursday said that it has deferred its decision on implementation of the proposed norms mandating listed companies to make immediate disclosure about their loan defaults.

“There was a discussion on this and the discussion was at length. I must say that the August 2017 default disclosure circular was issued at our own volition. As a concept it is good , in terms of implementation issues it was discussed at length but it requires further discussions so it has been deferred by the board,” said Sebi chairman Ajay Tyagi.

The regulator had put off implementation of its directive that required listed firms to inform exchanges if they default on loan payments to banks and financial institutions “until further notice”. This was done just a day before the norms were supposed to be kick in on October 1.

Apart from this, Sebi on Thursday announced integration of stocks and commodities trading on a single exchange from October 2018. The integration would be achieved in two phases.

According to Sebi, the first phase will involve integration at intermediary level while the second phase will deal with enabling a single exchange to operate various segments such as equity, equity derivatives, commodity derivatives, currency derivatives, interest rate futures and debt instruments, among others.

“All exchanges will be able to do securities trades as well as commodities trade from October 1, 2018. As you are aware when FMC was merged with Sebi in September 2015 there were different timelines for different items. Going by these timelines we could see that October 2018 perhaps is the right time where it would be three years after Sebi-FMC merger that all exchanges are able to deal with commodities or securities. This has been approved by the board,” said Tyagi.

Tyagi said products will have to be introduced with its approval and detailed guidelines will come out in consultation with all stake holders.

“At the brokers level we have already brought in the synergy what was required was to bring in synergy at exchange level so from October 1 they would be eligible to deal with all products subject to stipulation and guidelines so that these guidelines would be worked out in coming months,” said Tyagi.

Apart from this, the regulator has capped the cross-holding in credit rating agencies (CRAs) at 10 per cent and also proposed raising the minimum networth requirement to Rs 25 crore from the current Rs 5 crore. The promoter of a CRA would have to maintain a minimum shareholding of 26 per cent in it for a period of three years from the date of registration.

“The foreign CRA should be Incorporated in a Financial Task Force (FATF) jurisdiction and registered under their law only shall be eligible to promote a CRA in India,” said Sebi.

The regulator also said credit rating agencies will be permitted to “withdraw the ratings subject to the CRA having rated the instrument continuously for a stipulated period of time and in the manner as may be specified by it from time to time”.

Sebi also said that it will provide an additional method — qualified institutional placement (QIP) — route for listed entities to achieve the minimum public shareholding requirements.

“Higher minimum net worth requirements for CRAs and increased shareholding requirements along with minimum holding period for promoters of CRAs will ensure that only serious and credible players with long-term perspective enter the field. Increasing transparency through greater disclosures by issuers of listed debt will boost investor confidence and equip them to take timely decisions,” Ashu Suyash, MD & CEO, Crisil Ltd said.

On the issue of forensic audit into 331 shell companies listed by the ministry of corporate affairs, the regulator said that 49 companies had moved the Securities Appellate Tribunal and 12 firms got a stay from the tribunal.

“Sebi member has so far heard 43 cases and passed order in 34 cases. While forensic audit has been order in 28 cases in six cases all restrictions have been removed,” said Tyagi.

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