Concerned over the quality of compliance and disclosures made by companies, the Securities and Exchange Board of India (Sebi) on Monday issued a circular asking the stock exchanges to monitor the adequacy and accuracy of the disclosures being made by the companies and has advised them to put in place a proper framework and mechanisms.
After having told the stock exchanges in September to impose fines and then suspend companies from trading in case of consecutive defaults on compliance, Sebi on Monday took a step forward to ensure the quality of the same.
“Put in place appropriate framework (including adequate manpower) to effectively monitor the adequacy and accuracy of the disclosures made by listed companies,” said Sebi in its circular.
It further added that the stock exchanges should devise a framework to detect any non-compliance and mechanism to handle complaints linked to inadequate and inaccurate disclosure and non-compliance.
It has also asked the stock exchanges to submit an exception report with details of companies that do not respond to the clarifications sought by them and where the responses are not satisfactory. Sebi has directed the stock exchanges to begin with monitoring of top 500 listed companies (by market capitalisation as on March 31, 2013) fort he quarter ending Dec ember 31, 2013.
Sebi’s move follows from the IMF report on assessment of India’s financial sector and pointed out that the recognised stock exchanges (RSEs) have not done enough to enforce compliance.
“...Mechanisms to ensure compliance with listing obligations in India, which include periodic reporting, are a responsibility of the RSEs... .The information provided shows that the RSEs review periodic reports. However, such information (for examples, the minutes of the committee on non-compliance) leads to conclude that the RSEs have also not acted as vigorously as necessary in enforcing compliance by issuers with the listing/reporting conditions...,” said the report.
Earlier, while speaking on the issue in New Delhi last month, Sebi chairman UK Sinha, said that there are examples where companies are either not disclosing at all or when they are disclosing then in those cases the information provided is not correct.
He said that Sebi will make it more and more onerous and make sure that quality of disclosure improves and if it does not improve then resultant actions will follow.
* The move follows an IMF report on assessment of India’s financial sector that pointed out that recognised stock exchanges have not done enough to enforce compliance