SEBI, in its Board Meeting dated 22 March 2015, approved certain changes to the proposed SEBI (Listing Obligations and Disclosure Requirements) Regulations, after having reviewed the requirements relating to disclosures being made by listed entities on a continuous basis. Some of the key changes are as follows. A listed entity will have to disclose all events / information, first to stock exchange(s), not later than 24 hours of occurrence of event / information. Similarly, the outcome of board meetings shall be disclosed within 30 minutes of the closure of the meeting of Board of Directors. Further, the listed entity needs to disclose all events / information with respect to its material subsidiaries. The existing list of events shall be rationalized into two parts: events which are by nature material i.e., those that necessarily require disclosure without any discretion by the listed entity; and events which shall be treated to be material as per the guidelines for materiality, as specified by SEBI. SEBI would specify an indicative list of information which may be disclosed upon occurrence of an event. Furthermore, the listed entity shall provide specific and adequate reply to queries of stock exchange(s) pertaining to rumours.

SEBI has sought to control the existing level of discretion given to listed companies to decide on the materiality of events, since it resulted in inadequate disclosures. In a measure to strictly monitor compliance with disclosure or listing norms, SEBI seeks to convert the same into regulations, where by non-compliance will be met by strong penal action. While the move aims to help investors make well-informed investment decisions, it may result in a lot of unnecessary information being disclosed in the public domain. Further, companies may find it difficult to ascertain within a day whether an event / information is required to be disclosed under the vague tests of materiality proposed to be introduced by SEBI. It should be clarified that merely because certain information is material, it does not mandate disclosure. Such a requirement would give away a lot of the competitive advantage and intellectual property of a company.

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Date:September 28, 2015