To streamline the disclosure requirements, Sebi has proposed mandating top 250 listed companies to confirm or deny any information reported in the mainstream media, which may have material effect on the listed entity.
In addition, Sebi has suggested reducing the timeline to 12 hours from the occurrence of event or information from 24 hours at present for making disclosure to the stock exchanges.
To bring uniformity in the "Materiality Policy" across listed entities, it has been proposed a quantitative criteria of minimum threshold for disclosure of events based on the value or the expected quantitative impact of the event, Sebi said in its consultation paper made public on Monday.
These proposals are aimed at streamlining the disclosure requirements for material events or information required under LODR (Listing Obligations and Disclosure Requirements) rules and keeping pace with the changing market dynamics. The regulator has sought comments from the public till November 27 on the suggestions.
As per the draft papers, "top 250 listed entities shall necessarily confirm or deny any event or information reported in the mainstream media, whether in print or digital mode, which may have material effect on the listed entity under this regulation."
At present, a listed entity may on its own initiative, confirm or deny any reported event or information to stock exchanges under the LODR Regulations.
"Verification of reported events or information which may have material effect on the listed entity is essential to avoid establishment of a false market sentiment or impact on the securities of the entity," Sebi said,
Listed entities should provide additional quantitative thresholds or criteria for determining materiality of events in their "materiality policies". Such policy should be framed in a manner so as to assist employees in identifying potential material events which would be escalated and reported to the relevant key managerial personnel for determining materiality of the event and for making disclosure to stock exchanges.
With regard to material threshold, Sebi has proposed that the listed entities should disclose an event or information whose threshold value or the expected impact in terms of value exceeds the lower of two per cent of turnover or two per cent of net worth as per the last audited standalone financial statements or five per cent of three-year average of absolute value of profit/loss after tax.
Sebi has suggested that for the material events or information which emanate from the listed entity, including those related to acquisitions, Scheme of Arrangement, consolidation of shares and buyback of securities, the timeline for disclosure by the entity should be reduced from 24 hours to 12 hours.
In case of information which emanates from a decision taken in a meeting of board of directors, the disclosure should be made within 30 minutes from the closure of such meeting.
For the benefit of the investors, Sebi has proposed mandating disclosure of all announcements and communication made by the listed entity or its officials at one place.
The regulator proposed that announcement or communication to any form of mass communication media by directors or promoters or key managerial personnel of a listed entity, in relation to the listed entity, which is not already made available in the public domain by the listed entity, should be disclosed.
Also, it has been suggested to make disclosure about action taken by any regulatory, statutory and enforcement authority against the listed entity or its directors or key managerial personnel. Such listed entities should make disclosures about the name of the authority, nature and details of the action taken or initiated, details of the violation committed and its impact on financial or other activities.
Additionally, Sebi has suggested to make disclosure of letter of resignation, along with detailed reasons for the resignation of key managerial personnel, senior management and directors. At present, such disclosure is mandated only in case of resignation of auditors and independent directors.
Listed entities should make disclosure about fraud and defaults by director or senior management as Sebi has specified material information for investors. Currently, such disclosure by listed entity or its key managerial personnel or promoter, and arrest of key managerial personnel or promoter are mandated.
Sebi has recommended that listed entities should disclose about default in payment of fines, penalties and dues to any regulatory, statutory, enforcement or judicial authority.
Also, the regulator has recommended that the listed entities should make disclosures in relation to cybersecurity incident, cybersecurity breaches, or loss of data and documents in the quarterly corporate governance report.
Sebi has sought comments from the public whether loan agreement for lending to wholly-owned subsidiaries of the listed entity as well as inter-se transfer of the shares or voting rights in a subsidiary or an associate company between the listed entity and any of its wholly-owned subsidiaries should be exempted from disclosure requirements.