The market regulator, SEBI, has been strictly monitoring the compliance of disclosure or listing guidelines with the view to enable the investors to make well informed investment decisions, which are now being converted into regulations for better compliance.
Accordingly, SEBI on March 22, 2015, in its Board meeting, in PR No. 70/2015, approved the changes in the SEBI (Listing Obligations and Disclosure Requirements) Regulations pertaining to the disclosures of 'Material' information by the listed entities.
SEBI in its Board Meeting mentioned that in order to determine whether a particular event/information is material, the listed entity shall consider the following criteria:
a) An event/information whose omission will like to result in discontinuity/alteration of information already available publicly; or result in significant market reaction if the said omission came to light at a later date;
b) If in the opinion of the Board of Directors of the listed entity, the event/information is considered material
Further, it has also been decided that the board of the listed entity shall frame a policy for determination of materiality, which shall be disclosed on its website. SEBI will soon specify an indicative list of information which may be disclosed upon occurrence of an event.
The Board provided that the decision of board meetings shall be within 30 minutes of the closure of Board meeting be informed to SEBI. Apart from this the listed entity shall make the disclosure of all events/ information, first to stock exchange(s) where the share of the Company is listed, as soon as reasonably practicable and not later than 24hours of occurrence of event/information.
In addition to current requirement of making disclosure in time of occurrence and after the cessation of the event, updation of disclosure on material developments shall also be made on a regular basis till such time the event/information is resolved/closed with explanations wherever necessary.
In a major initiative it was also decided by SEBI that the listed entities shall disclose on their website all events/ information which is material and such information shall be hosted for a minimum period of 5 years and thereafter as per the archival policy of the listed entity, as disclosed on its website.
The requirement of disclosure of all events or information will be applicable with respect to subsidiary which is material for such listed entity.
Apart from this, the listed entity shall provide "specific and adequate" reply to queries of stock exchange(s) with respect to rumors and may on its own initiative also, confirm or deny any reported information to the stock exchange(s).
The Board also decided that the existing list of events as prescribed will be categorized into two parts:
a) Events which are by nature material i.e. those that necessarily require disclosure without any discretion of the listed entity;
b) Events which shall be construed to be material based on application of the guidelines for materiality.
The objective behind such tightening of the compliances was due to the leaking of selective information by the entities that to through media without informing the investors first. The promoters and the management would make personal gains by inflating the stock value before particular events, through this selective information. Prior to this change, the entities were required to make disclosures at the time of occurrence and after the cessation of the event. But now listed entities have to regularly update the information with respect to the material events on continuous basis, until the event/information is resolved/closed with explanations.
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