In order to streamline disclosure requirements, markets regulator SEBI has proposed top 250 listed companies to confirm or deny any information reported in the mainstream media, which may have a material impact on the listed entity.
Further, SEBI has suggested to reduce the time limit from the present 24 hours to 12 hours from the occurrence of the event or information for making the disclosure to the stock exchanges.
to bring uniformity in ‘Materiality Policy’ in Listed EntitiesSebi, in its consultation paper made public on Monday, has proposed quantitative criteria of minimum threshold for disclosure of events based on value or expected quantifiable effect of the event.
The purpose of these proposals is to streamline disclosure requirements for material events or essential information. LODR (Listing Obligations and Disclosure Requirements) Keeping pace with the regulations and changing market dynamics. The regulator has sought public comments on the suggestions by November 27.
As per the draft papers, “The top 250 listed entities shall confirm or deny any event or information reported in the mainstream media, whether in print or digital mode, which may have a material impact on the listed entity under this rule ” At present, a listed entity can confirm or deny any event or information reported to the stock exchanges under LODR regulations.
“Verification of reported events or information, which may have a material effect on the listed entity, is necessary to avoid false market sentiment or impact on the securities of the entity,” SEBI said.
Listed entities should provide additional quantitative thresholds or criteria for determining the materiality of events in their ‘Materiality Policies’.
Such policy should be framed in such a way as to assist the employees in identifying potentially material events and to determine the materiality of the event and to notify the relevant key managerial personnel for making disclosures to the stock exchanges .
With regard to material threshold, SEBI has proposed that listed entities should disclose an event or information whose expected effect in terms of threshold value or value does not exceed 2% of turnover or 2% of net worth as per the last audited standalone be less 5% of the three year average of the full value of the financial statements or profit/loss after tax.
SEBI has suggested that for material events or information emanating from the listed entity, including those relating to acquisitionarrangement plan, For consolidation of shares and buyback of securities, the time limit for disclosure by the entity should be reduced from 24 hours to 12 hours.
In case of information which arises out of a decision taken in a meeting of the Board of Directors, the disclosure should be made within 30 minutes of the closure of such meeting.
For the benefit of investors, SEBI has proposed to mandate disclosure of all announcements and communications made by a listed entity or its officers at a single place.
The regulator proposed that any announcement or communication by directors or promoters or key managerial personnel of a listed entity to any form of mass media in respect of a listed entity, which has not already been made available in the public domain by the listed entity , should be disclosed.
Also, it is suggested to disclose about the action taken by any regulatory, statutory and enforcement authority against the listed entity or its directors or key managerial personnel. Such listed entities should disclose to the Authority the name, nature and details of action taken or initiated, details of contravention committed and its impact on financial or other activities.
Additionally, SEBI has suggested disclosure of resignation letters of key managerial personnel, senior management and directors with detailed reasons for resignation. At present, such disclosure is mandatory only in case of resignation of auditors and independent directors.
Listed entities should make disclosures about frauds and defaults by directors or senior management as SEBI has specified important information for investors. At present, such disclosure by the listed entity or its key managerial personnel or promoter and arrest of key managerial personnel or promoter is mandatory.
SEBI has recommended that listed entities should make disclosures about defaults in payment of fines, penalties and dues to any regulatory, statutory, enforcement or judicial authority.
Further, the regulator has recommended that listed entities should make disclosures in respect of cyber security incident, cyber security breaches, or loss of data and documents in the quarterly corporate governance reports.
SEBI has sought comments from the public whether loan agreement for lending to wholly owned subsidiaries of a listed entity as well as inter-transfer of shares or voting rights in a listed entity and any of its wholly owned subsidiary or associate company -Owned subsidiaries should be exempted from disclosure requirements.