Sebi to Drive Disclosure Standards; abolish permanent board seats for individuals

New Delhi, To ensure greater transparency and timely disclosure of material events by listed entities, Sebi on Wednesday decided to amend the standards introducing a quantitative threshold for determining the materiality of events. In addition, there will be a “stricter timeline for the disclosure of material events/information that have been decided at the board meeting (within 30 minutes) and that originate within the listed entity (within 12 hours),” Sebi said in a release.

The regulator has also decided to abolish the practice of persons having a permanent seat on the boards of directors of listed companies.

These proposals were approved by Sebi’s board at its meeting here on Wednesday.

“Rumors in the market are verified and confirmed, denied or clarified, as appropriate, by the top 100 listed entities by market capitalization as of October 1, 2023, and by the top 250 listed entities as of April 1, 2024,” the release said.

To strengthen corporate governance in listed entities, the regulator said periodic shareholder approval will be required for any special right granted to a shareholder of a listed entity to address the issue of the perpetuity of special rights.

A periodic shareholder nod will also be required for any director serving on the board of a publicly traded entity “to abolish the practice of permanent board seats.”

Among other things, the timeline for the filing of the first financial results by newly listed entities will be streamlined to overcome the challenges in the immediate filing of financial results after listing and to ensure that there are no omissions in the filing of financial results .

Sebi also said that listed entities will have to fill the vacancy of directors, Compliance OfficerChief Executive Officer and Chief Financial Officer within a period of three months from the date of such vacancy to ensure that such critical positions are not left vacant.

In an effort to strengthen the recovery mechanism for investor complaints in the securities market, Sebi has decided to operationalize the online dispute resolution mechanism for investors with registered intermediaries and regulated entities.

The move comes against the backdrop of an increase in investor participation in the securities market and the emergence of technology-enabled dispute resolution frameworks.

The Online Dispute Resolution (ODR) system would be extended to MII (Market Infrastructure Intermediaries) managed reconciliation and arbitration mechanisms for registered intermediaries, regulated entities and their investors and customers.

In addition, the proceedings would be conducted in a hybrid mode, the dispute resolution process will be streamlined and other measures will be taken to strengthen enforcement of judgments, the release said.

In order to increase transparency and streamline certain issuance processes, changes will include changes to the capital issuance regulations and disclosure requirements (ICDR).

If the issuer elects to subscribe for a shortfall in demand or to cover subscription risk, this must be disclosed in the offer memorandum prior to the opening of the offering.

A listed entity may only announce a bonus issue of shares after approval from the exchanges for listing and trading of all pre-bonus securities it issues. The bonus payout should only be made in dematerialized form, the release said.