As many of you may be aware the stock markets across the globe are guided by information which set the tone of sentiments for the markets. But many a times, information dissemination does not happen in a systemic way which leads only few benefitting in the stock markets.

But now cracking the whip, the Securities and Exchange Board of India (SEBI) has directed stock exchanges vide a circular, to strengthen their surveillance system to ensure the disclosure standard of listed companies is accurate and adequate. The capital market regulator in its circular has cited that the contents of the disclosures made by such companies are not adequate and accurate due to which, investors are unable to take informed investment decisions based on such disclosures. Thus the regulator is also of the view that, the current monitoring mechanism of stock exchanges to ascertain the adequacy and accuracy of disclosures made in compliance with the 'listing agreement', need to be made more effective.

It is noteworthy that when a company lists its securities with a stock exchange, it signs a listing agreement which it needs to comply. A listing agreement is a contract between a stock exchange and a listed company, and it comprises about 50 clauses - on corporate governance and information based disclosures such as filing of results, shareholding data - which listed firms have to follow.

So, what has SEBI advised stock exchanges to do?

• Put in place appropriate framework (including adequate manpower) to effectively monitor the adequacy and accuracy of the disclosures made by listed companies
  
  
• Devise the framework in such a way that it detects any non-compliance / violation which needs reporting
  
  
• Treat inadequacy and inaccuracy of disclosure as non-compliance, wherever applicable
  
  
• Put in place an appropriate mechanism for handling complaints related to such inadequate and inaccurate disclosures and non-compliances
  
  
• Obtain details of the promoters / directors and/or key managerial personnel of the listed companies who shall be responsible for ensuring compliance with the provisions of the 'listing agreement' and in case of defaults, disclose such details on its website
  
  
• Submit an 'exception report' in addition to the existing reporting requirements
  
  

The regulator at present, has asked stock exchanges to begin with monitoring the adequacy and accuracy of disclosures made by top 500 listed companies (by market capitalization as on March 31, 2013) in compliance with some of the important clauses such as clause 35, 36, 41 and 49 of the equity listing agreement for the quarter ending December 31, 2013.

PersonalFN is of the view that, such vigilant checks would ensure systemic dissemination of price sensitive information which will enable investors to take informed investment decisions. Moreover, it has built in effective responsibility and accountability to ensure that listed companies comply and do not lag in reporting material and price sensitive information, which could have an impact on shareholders wealth.

Add Comments