The capital markets regulator Securities and Exchange Board of India (Sebi) has proposed beefing up listing obligations and disclosure norms in areas such as result filing by new-listed companies, expediting appointments of key managerial positions (KMPs) and action on key people in case of noncompliance.
In a consultation paper, the markets regulator has proposed that the demat accounts of the whole-time directors, including the managing directors and chief executive officers (MD & CEOs) should be frozen, in addition to the demat accounts of the promoters, for continued non-compliance.
At present, regulations require freezing of demat accounts of only the promoters in case of non-compliance or non-payment of fines. The proposed rule change will address cases where the listed companies are professionally-managed and do not have an identifiable promoter.
Further, Sebi has also proposed a stricter timeline of three months for filling up the vacant KMPs such as chief financial officer (CFO), company secretary, MD and CEO. Currently, a six-month period is provided to fill up such positions.
“Considering the gravity of the responsibilities entrusted on the compliance officer, CEO and CFO of a listed entity, there is a need to specify a reasonable timeline within which a vacancy arising for such officers should be filled up by the listed entity,” Sebi said in the paper.
The market watchdog has also sought public opinion on mandating listed companies to immediately fill the position of an independent director which may become vacant due to change in designation of an existing director, appointment of a non-independent director or on completion of the tenure of a current one.
Sebi pointed out that as companies are always aware in advance of the consequent impending non-compliance with composition of the board of directors, they should immediately comply.
At present, on resignation or removal of an independent director, a period of three months is provided to fill the position.
In the consultation paper, the regulator has also proposed to ease disclosure norms for newly-listed companies. Under the proposed norms, a time period of 15 days may be provided for newly-listed entities for disclosure of first financial results.
“Since the financial results are price sensitive information, such disclosures immediately post listing may have a large impact on the company’s share price even before the price of its scrip has stabilised after listing,” said Sebi.
On initial public offerings, the feeling among members of Sebi is that they may be deliberately getting bunched up to avail a maximum gap between listing date and timeline for disclosure of first financial results.
Sebi has also sought public comments on the proposed regulations by March 6. Experts said that the proposed norms improve the governance standards at India Inc and help safeguard the interest of minority investors.
