Concerned over large-scale discrepancies in mandatory disclosures by listed firms, Securities and Exchange Board of India on Monday tightened its regulations in this regard and asked bourses to put in place a stronger mechanism with additional manpower to monitor adequacy and accuracy of such disclosures.
The companies would also have to provide the details of their promoters, directors and/or key management personnel who would be held responsible for ensuring compliance with the disclosure norms, while stock exchanges have been asked to publish these details on their websites in case of defaults.
Sebi has also asked the stock exchanges to set up a separate monitoring cell with identified personnel to ensure compliance with the new norms.
The stock exchanges, who act as front-line regulator for listed companies, have also been asked to "keep themselves informed of the updates in various media including print and mass media with respect to a listed company."
The bourses will scrutinise the disclosures and ensure that no important information has been omitted by the company. It has been often found that key business developments first appear in media and later in company's regulatory filings.
Issuing detailed guidelines on corporate disclosures, which are governed by Listing Agreement signed by the listed firms with the stock exchanges, Sebi said that the stock exchanges would take appropriate actions including levying of fine on the companies in case of non-compliance.
The bourses would also submit to Sebi an "Exception Report" in addition to the existing reporting requirements, with the details of companies which do not respond to the clarifications sought by them and/or where the response submitted by the company is not satisfactory.
While provisions in existing regulations also require listed companies to file disclosure reports with stock exchanges about every key information and developments, the new norms have been put in place for more effective implementation and compliance at the end of stock exchanges as well as the companies.
"Concerns have been raised that even though listed companies make disclosures to Stock Exchanges within the time frame stipulated under the Listing Agreement; the contents of the disclosures made by such companies are not adequate and accurate. Therefore, investors are unable to take informed investment decisions based on such disclosures," Sebi said.
Hundreds of companies have been found to have failed in making adequate and accurate disclosures even in routine filings like financial results, shareholding patterns and corporate governance reports.
In its recent Financial Sector Assessment Report on India, IMF also said that that the mechanisms to ensure compliance with listing obligations in India, which include periodic reporting, have limitations.
IMF said that the the stock exchanges review periodic reports, but they have not "acted as vigorously as necessary in enforcing compliance by issuers with the listing/reporting conditions".