The Securities and Exchange Board of India (Sebi) has proposed stipulating top 250 listed companies to confirm or deny any information reported in the mainstream media that could have material impact on the listed entity and has reduced the disclosure timeline to 12 hours from the occurrence of events.
Earlier, the company has to disclose information to the stock exchanges within 24 hours. Currently, a listed entity may on its own initiative, confirm or deny any reported event or information to stock exchanges under the Sebi regulations.
It has proposed a quantitative criterion of minimum threshold for disclosure of events based on the value or the expected quantitative impact of the event, Sebi said in its consultation paper made public on Monday. These proposals are aimed at streamlining the disclosure requirements for material events or information required under LODR (Listing Obligations and Disclosure Requirements) rules and keeping pace with the changing market dynamics, Sebi added.
“Verification of reported events or information which may have material effect on the listed entity is essential to avoid establishment of a false market sentiment or impact on the securities of the entity,” Sebi said.
Listed entities should provide additional quantitative thresholds or criteria for determining materiality of events in their “materiality policies”. Such policy should be framed in a manner so as to assist employees in identifying potential material events which would be escalated and reported to the relevant key managerial personnel for determining materiality of the event and for making disclosure to stock exchanges, it said.
Sebi has proposed the rules for listed entities, whose threshold value, or the expected impact in terms of value, exceeds the lower of two per cent of turnover or two per cent of net worth as per the last audited standalone financial statements or five per cent of three-year average of absolute value of profit/loss after tax. In the case of information which emanates from a decision taken in a meeting of the board of directors, the disclosure should be made within 30 minutes from the closure of such meeting, the regulator added. Sebi has proposed mandating disclosure of all announcements and communication made by the listed entity or its officials at one place for the benefit of the investors.
The regulator proposed that announcement to any form of mass communication media or action taken by directors or promoters or key managerial personnel, in relation to the listed entity, which is not already made available in the public domain, should be disclosed.
Such listed entities should make disclosures about the name of the authority, nature and details of the action taken or initiated, details of the violation committed and its impact on financial or other activities. Sebi has suggested making a letter of resignation, with detailed reasons, for key managerial personnel, senior management and directors. Such disclosure is mandated only in case of resignation of auditors and independent directors.
“Listed entities should make disclosure about fraud and defaults by director or senior management as Sebi has specified material information for investors,” it said. Currently, such disclosure by a listed entity or its key managerial personnel or promoter, and arrest of key managerial personnel or promoter are mandated. Sebi has recommended that listed entities should disclose about default in payment of fines, penalties and dues to any regulatory, statutory, enforcement or judicial authority.