23 Dec 2013

Financial and Corporate Disclosures

Securities and Exchange Board of India (SEBI) has put in place mechanism to address possible violation of regulations for disclosing key details such as financial results and shareholding data. 

Listed companies are required to comply with Listing Agreement which is executed by the company with the Stock Exchange, while getting its securities listed. 

Listing Agreement requires various key disclosures by listed companies, which includes disclosures on financial results and shareholding data.

As per the provisions of Securities Contract (Regulation) Act, 1956, Securities Contract (Regulation) Rules, 1957 and Regulations made thereunder, and the rules and Bye-laws of the relevant Stock Exchange, a company listed on a stock exchange is required to comply with the conditions of the Listing Agreement, failing which trading in the securities of such non-complaint companies is liable for suspension. 

SEBI has reported that they have not found any large scale discrepancies in the mandatory financial and other corporate disclosures made by listed companies to the stock exchanges. 

To maintain consistency and uniformity of approach by the stock exchanges for taking action against the listed entities for non-compliance with certain important listing conditions, such as Clause 31 (non-submission of annual report), Clause 35 (non-submission of shareholding pattern), Clause 41 (non-submission of financial result) and Clause 49 (non-submission of corporate governance compliance report) of the listing agreement, SEBI has prescribed vide its circular dated 30th September, 2013, Standard Operating Procedure (SOP) for suspension and revocation of suspension of trading in the shares. 

As per SOP, delay in compliance would lead to measures such as imposition of fines, transferring the trading in the shares of the company to separate category, freezing of shares of the promoter and promoter group and finally to suspension of trading in the shares of the company. 

Further, vide its circular dated 18th November, 2013, SEBI mandated the Stock Exchanges to put in place appropriate framework to effectively monitor the adequacy and accuracy of the disclosures made by listing companies and for handling complaints related to such inadequate and inaccurate disclosures and non-compliances. 

This was stated by Minister of State for Finance, Shri Namo Narain Meena, in written reply to a question in the Lok Sabha today. 

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