Market regulator Securities and Exchange Board of India recently came out with an important consultation paper on disclosure norms by listed entities. Among the various suggestions, SEBI mandated top 250 listed companies to confirm or deny any information reported in the “mainstream media” that may have material effect on the listed entity.

According to the SEBI paper, many a time, the listed entities are also required to provide specific and adequate replies to all rumour verification queries raised to them by stock exchange(s) with respect to any event or information pertaining to them being circulated through social media, etc. The listed entities should also take the initiative to confirm or deny any reported event or information.

“Given the aforesaid context, there arises a need to review various aspects of the disclosure requirements prescribed under the LODR regulations. The amendments to the disclosure requirements proposed in this consultation paper aim at keeping pace with changing market dynamics. In today’s digital age where information is readily available, it is expected that listed entities adopt technology-based solutions for ease of compliance.”

However, this suggestion will face a lot of difficulties on the ground. Large-scale information is flowing across media bandwidth such as print, electronic and social media (Twitter, Instagram and Facebook) and across geographies 24*7 through the year.

Grey areas

First, the definition of mainstream media itself is a grey area, as SEBI said “print or digital mode.” Whether it includes social media, needs a clarification.

Even if India Inc appoints a team or a person for this is purpose, it is next to impossible for them to track and pin down such news flows and information sitting in a registered or head office. Even any tech based tool will have its limitation as it cannot filter the entire news flow generated. Even the adoption of tech-based solutions, as suggested by SEBI in the consultation paper, will come with a cost.

Hence, corporations will need to spend a huge sum in tackling such news menace. However, this suggestion is contrary to SEBI’s own stance. While it wants to protect minority shareholders in CIRP-referred companies, this move will actually burden the companies, thus affecting shareholders’ value.

Besides, the companies that fall under 225 and 275 in terms of market capitalisation will have to constantly watch stock price movement almost on a daily basis to ascertain their rankings.

Instead, SEBI can take upon itself the task, along with exchanges, by using their funds collected via listing and other operational fees. For want of money, they can even charge a one-time nominal fee from listed and proposed-to-be listed players to develop a fool-proof system.

Welcome suggestions

However, the several other suggestions are also welcome. They include reducing the timeline to 12 hours (currently 24 hours) from the occurrence of corporate event or information for making disclosure to the stock exchanges; materiality threshold (a quantitative criteria) based on the value or the expected quantitative impact of the event; disclosure within 30 minutes after board meeting, disclosure of all announcements and communication made by the listed entity or its officials at one place; about action taken by any regulatory, statutory and enforcement authority against the listed entity or its directors or key managerial personnel; and disclosure of letter of resignation, along with detailed reasons for the resignation of key managerial personnel, senior management and directors.

Related Topics
comment COMMENT NOW