New year resolution: Sebi plans focus on disclosure regime

Companies are required to inform shareholders of their annual general meetings 21 days before the event. However, shareholders who watch stock exchange websites for this information might not always get this three-week notice, according to Shriram Subramanian, managing director of InGovern Research Services. Reason: only some companies make an exchange disclosure; many don’t.

This problem related to non-uniform disclosure standards by companies on issues such as the important dates (as above) and material developments such as getting large orders or trading in securities by insiders is likely to be addressed with finality by the regulator.

This year, the Securities and Exchange Board of India (Sebi) is planning to revamp its disclosure requirements to apply a uniform standard to all companies, reduce the number of times certain disclosures are made, as well as introduce systems for ‘automatically gathering and integrating’ information from companies. In fact, disclosures form one of the key areas of focus for the regulator, with a revamped regime likely to be introduced in the current financial year, according to Sebi’s last board meeting minutes.

“The focus during the year 2015-16 will be on implementation of corporate governance standards by listed entities… and system-based disclosures,” it said.

“What is material information is liberally interpreted. Some companies will disclose a $10-million deal (or)… if they are raising debt… others don’t,” said Subramanian.

“We talk to companies and… there is a great deal of ambiguity. There needs to be a better understanding of what is expected. (If there is an) M&A (mergers and acquisitions transaction)… when do you disclose it? It is an area where companies would like some clarity,” said Amit Tandon, founder and managing director of proxy advisory firm Institutional Investor Advisory Services India Limited (IiAS).

Greater use of technology is expected to be used for the same.

“To make use of technology, the concept of system-driven disclosures seeks to disclose the changes in shareholding in a listed company by automatically gathering and integrating information from available sources in a timely and accurate manner,” said Sebi’s board meeting minutes.

The regulator noted that different regulations sometimes require the disclosure of the same information multiple times. This can be integrated in such a way that this need be done only once. Also, this would help real-time monitoring of compliance as well as reduce the compliance burden.

Sebi is also working on revising the disclosure requirements for companies, which are coming to raise money from the public for the first time.

The other areas of focus mentioned for the year include the introduction of initial public offerings in electronic form, cyber security and a better environment for capital-raising by Indian start-ups.