What Are SEBI’s Proposals To Rejig Disclosure Norms Of Listed Entities?

India’s capital markets regulator aims to streamline the disclosures by listed entities and strengthen the compliance with the SEBI (Listing Obligations and Disclosure Requirements) Regulations 2015.

The Securities & Exchange Board of India (SEBI), which released a consultation paper, is seeking public comments at consultationcfd@sebi.gov.in by 6 March as it seeks to revise the regulations to address certain issues.

The SEBI’s consultation paper seeks to address the following issues:

• Submission of first financial results by newly listed entities.

• Timeline to fill up vacancy of directors, compliance officer, chief executive officer (CEO) and chief financial officer (CFO) in listed entities.

• Freezing of demat accounts of the managing director (MD), whole-time director and CEO of a listed entity for continuing non-compliance with the LODR Regulations and/or non-payment of fines by a listed entity.

DISCLOSURE OF RESULTS

The current regulations mandate listed entities to submit financial results within the following timelines:

• Quarterly financial results within 45 days from the end of each quarter, other than the last quarter.

• Quarterly financial results for the last quarter and the annual financial results within 60 days from the end of the financial year.

The SEBI received representations regarding challenges faced by the newly listed entities immediately after their listing and about the gap in the current regulatory provisions for ensuring timely disclosure of the first financial results of such newly listed entities.

The regulator said to provide adequate time to newly listed entities to disclose their first financial results post listing, it is desirable that at least 15 days’ time from the date of listing may be provided for such disclosures to a newly listed entity.

Proposals

• The listed entity, post listing, should submit its first financial results, quarterly or annual as the case may be, immediately succeeding to the periods for which financial statements were disclosed in its offer document for initial public offer, as per the indicated timeline, or within 15 days from the date of listing, whichever is later.

TIMELINE FOR FILLING-UP VACANCY

Proposals To Fill Up Vacancy In Listed Entities:

For Directors

• The extant sub-regulation 25(6) of LODR Regulations may be deleted. This regulation specifies that an independent director who resigns or is removed from the board of the listed entity should be replaced by a new independent director by the listed entity at the earliest but not later than three months from the date of such vacancy.

• Any intermittent vacancy of a director should be filled-up by the listed entity at the earliest but not later than three months from the date of such vacancy;

• Provided that this provision is not applicable to a listed entity, which fulfils the requirement under sub-regulation (1) of regulation 17 without filling up the vacancy created;

• Provided further that in case the listed entity has become non-compliant with the requirement under sub-regulation (1) of regulation 17 due to appointment of a non-independent director or change in designation of an existing director or cessation of an existing director due to completion of his/her tenure, the vacancy of director so created should be filled-up by the listed entity not later than the date of such vacancy.

For Compliance Officer, CFO, CEO/MD

• Any vacancy of a compliance officer should be filled-up by the listed entity at the earliest but not later than three months from the date of such vacancy.

• Any vacancy of a CFO should be filled-up by the listed entity at the earliest but not later than three months from the date of such vacancy.

• Any vacancy of a CEO/MD/whole-time director/manager should be filled-up by the listed entity at the earliest but not later than three months from the date of such vacancy.

FREEZING OF DEMAT ACCOUNTS

The SEBI said the current penal provisions work well for promoter-driven companies, but the same may not be relevant for companies without any identifiable promoters.

Increasing number of professionally managed companies (without any identifiable promoters) are getting listed on the stock exchanges and therefore, the freezing provisions are not applicable to such companies if they are non-compliant with the LODR Regulations and/or have outstanding fines to the stock exchanges, it added.

Hence, there’s a need to review the aspect of freezing of promoters accounts, the regulator said.

Proposals

• The demat account of the whole-time director, including the MD, and CEO, may be frozen, in addition to the demat account of the promoters, for continuing non-compliance and/or non-payment of fines by a listed entity.

• This may result in timely compliance and/or payment of outstanding fines by listed entities and would ensure that whole-time director, MD, and CEO are held accountable for non-compliance or non-payment of fines by listed entities.

• Further, this proposal would also be more relevant for professionally managed companies.

Conditions For Unfreezing Demat Accounts

• The demat accounts of whole-time director/MD/CEO who resign from a non-compliant entity should be unfrozen after the listed entity complies with the applicable provisions of the LODR Regulations and/or pays the outstanding fines, or on the 90th day from the date of getting relieved from the company, whichever is earlier.

• The new whole-time director/MD/CEO should be given 90 days from the date of assuming charge to ensure the listed entity’s compliance with the applicable provisions and payment of outstanding fines, failing which their demat accounts should be frozen.

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