Suggestions on review of disclosure requirements under Regulation 30 of SEBI (Listing Obligations and Disclosure Requirements), 2015

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Suggestions on review of disclosure requirements under Regulation 30 of SEBI (Listing Obligations and Disclosure Requirements), 2015

Tejasvi

@tejasvi

August 10, 2022

Public Policy

309

In view of the changing market dynamics, the Securities and Exchange Board of India (SEBI) felt a need to review the disclosure requirements for listed entities under Regulation 30 of SEBI (Listing Obligations and Disclosure Requirements), 2015 (LODR Regulations)

Based on feedback from the Industry, we have provided the following inputs to SEBI:

Question 1: Is there a need for introducing threshold limit for disclosure of events specified under Para B of Part A of Schedule III of LODR?

Response: As per Regulation 30(3) of LODR Regulations, listed entity is required to make disclosure of events specified in Para B of Part A of Schedule III, based on application of guidelines for materiality, as specified in Regulation 30(4). Para B of Part A of Schedule III include events like commencement of operations/ delay in commencement of operations, disruption of operations, effects of change in regulatory framework, which are subjective and may differ from company to company depending upon its size, nature or type of business. The need to disclose such events to stock exchange arises only when they are considered material by the company. Hence, we have submitted that there is no need for introducing threshold limit for disclosure of events specified under Para B of Part A of Schedule III of LODR.

Question 2: Are there any additional material events that should be specified under Part A of Schedule III (Para A and Para B)?

Response: Currently, the list of events specified under Para A of Part A of Schedule III of SEBI LODR is quiet exhaustive which inter-alia includes acquisitions, restructuring, fund raising, financials results, change of directors / auditors, insolvency etc. The outcome of said events have to be mandatorily disclosed within the prescribed timeframe. Hence, we have submitted that there is no need of including any additional material events in Part A of Schedule III.

Question 3: Are there any events or information for which timeline for disclosure should be reduced from existing 24 hours?

Response: Currently, as per Regulation 30(6) of LODR Regulations, a Company is required to disclose all events specified in Part A of Schedule III to stock exchange within prescribed timelines (i.e., 24 hours from the occurrence of the event/ information). However, matters specified in sub-para 4 of Para A of Part A of Schedule III needs to be disclosed within 30 minutes of the closure of board meeting. This practice is working well within the Industry.

Question 4: Is there a need for harmonisation of principles of disclosures under LODR Regulations with that of SEBI (Prohibition of Insider Trading) Regulations, 2015 (PIT Regulations)?

Response: We believe that the National Stock Exchange of India was once evaluating harmonising disclosure norms under LODR Regulations with SEBI PIT Regulations. In this regard, we would like to highlight that the objective of SEBI PIT Regulations is to prevent "insider trading" by prohibiting dealing, communicating, counselling or procuring "unpublished price sensitive information". Listed companies are required to frame a "Code for Prevention of Insider Trading" to be observed by the Directors and Designated Employees in the performance of their duties. Therefore, companies’ disclosure to stock exchanges under PIT Regulations are in compliance with Companies Code for Prevention of Insider Trading in relation to the acts done by its employees, directors, officers and/or insiders. On the other hand, disclosure to stock exchanges under LODR Regulation are for the shareholders and external stakeholders of the Company in connection with companies functioning.

We have suggested that any proposal for harmonisation of disclosures under LODR Regulations with that of PIT Regulations may be contradictory to the basic object of these Regulations and intended recipient of the information.

We hope you will find the update useful. We will keep you posted on further developments in this regard.

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Tejasvi