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Paltry disclosures by listed companies may soon be passé with the stock exchanges demanding timely and fair disclosures of all material events and price-sensitive information.
Pending the market regulator SEBI’s plan to revamp the norms around mandatory disclosures of material events, the country’s top equity exchanges have stepped in to raise the bar and fill the compliance vacuum on this front.
National Stock Exchange, the country’s largest bourse by profits, has come up with a Guidance Note on clause 36, which is the clause in the listing agreement that requires listed companies to disclose material events to stock exchanges.
The NSE’s Guidance Note will not be mandatory on listed companies, but corporates cannot easily escape from material disclosures. This is because NSE intends to make public (mainly through its website) the names of companies that fall short on compliance.
In fact, one should not be surprised if the NSE puts in public domain the entire communication between the exchange and a company that is shying away from disclosing material events. It covers all aspects of existing clause 36 and does not get into the realm of the disclosure rules planned by SEBI for which a discussion paper has already been put out for public comments, sources in the NSE said.
Poor enforcementIt is not that no legal requirement existed for companies to disclose material events to bourses. Clause 36 already mandated disclosure of material events and price-sensitive information.
The main issue was that the compliance level under Clause 36 was less than desired and the bourses as first level regulators were perceived to be lax about enforcing the listing norms on this count.
Moreover, companies were furnishing varying details in their disclosures for similar events.
The main concern among investors was that most disclosures were at best fleeting and gave very little information to make a meaningful assessment of the impact of material events.
The Bombay Stock Exchange, the other main equity bourse, too has come up with a guidance note on disclosure of material events under Clause 36.
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