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Sebi plans regulation to make sure companies implement disclosures

Says there are cases when disclosures were made just to boost shares of firms.

Written by ENS Economic Bureau | New Delhi | Published: October 11, 2013 5:05:53 am

The Securities and Exchange Board of India (Sebi) plans to make companies making disclosures in stock exchanges stick to them. Sebi has found that companies sometimes make announcements that send the stock prices soaring but the actual implementation of those remains unfinished for years.

“We are going to make it more difficult to make sure that timely disclosures are made and the quality of those disclosures improve,” said UK Sinha,chairman of Sebi,at a seminar on Thursday.

He said that Sebi plans to issue the regulations soon. Sebi has already come up with rules that make compulsory for companies to use the proceeds from a public issue for the purpose for which they are raised.

Sinha also said he has set up a forensic accounting cell within Sebi to keep an eye on the quality of corporate disclosures. Listed companies,as per Sebi rules,are supposed to first inform the stock exchange any information that can impact their stock price before being told to the media.

While,on an average,300-400 announcements are made daily by firms at the bourses,Sinha argued that these are,at times,meant to keep up the buzz around a company’s share price than refer to any clear plans. Speaking at the National Conference on ‘Capital Market Frauds and Malpractices: Genesis,Resolution and Prevention’ in New Delhi,Sinha said the market is witnessing such information-based frauds,which he termed are ‘very difficult to detect’.

According to him,there are examples where companies either don’t disclose at all or provide incorrect information. He touched upon a case where a company had announced in its public offer that it has plant and machinery at a location but later it was discovered that there was nothing at that place.

… issues draft REITs rules

New Delhi: In a move that may lead to higher capital inflows and greater retail participation in the country’s real estate sector,the Securities and Exchange Board of India (Sebi) on Thursday announced the draft regulations on Real Estate Investment Trusts (REITs). While REITs will enable retail investors to invest in big real estate properties,Sebi has proposed to initially allow only HNIs and institutions to invest through REITs and has pegged the minimum investment size at Rs 2 lakh.

While REITs — a company that invests generally in completed,income-generating commercial real estate listed at the bourses — provide small investors an avenue to invest in big real estate properties. It also offers developers and other big investors in the project with an exit option. Sebi,in its draft regulations issued on Thursday,has proposed to set up REITs as a trust with a net worth of at least Rs 20 crore and minimum five years of experience.

In India REITs will be allowed to initially raise funds only through initial public offering (later can come with follow on offerings) and the units will have to be listed on exchange.

Real estate players have welcomed the move. “The introduction of REITs in the long-term would propel the sector,spurring capital inflows and bringing institutional credibility,” said Anshuman Magazine,CMD,CBRE South Asia. ens

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