Sebi wants yearly tell-all accounts

Regulator wants a consolidated one-stop repository statement for all company-related information; wilful defaulter guidelines in the works

The Securities and Exchange Board of India (Sebi) plans to issue guidelines requiring listed companies to file an integrated document called the annual information memorandum.

This will contain disclosures about business and statutory information. Sebi Chairman U K Sinha said the regulator was working on enforcing this in the “near future”. And, reiterated his earlier statements that Sebi was working on a framework to regulate capital raising by wilful defaulters on loans.

Speaking at a Confederation of Indian Industry (CII) conference here, Sinha said, “A very emphatic representation has been made to us (on the) various requirements we have on takeover code, minimum public shareholding, quarterly and annual reporting. Why cant we integrate these? Any filing by any corporate under any of the Sebi regulations will be combined and will be available to the public at large.”

TOUGHER DISCLOSURE NORMS

• Sebi wants annual statement integrating all disclosures, including listing by each firm of risk factors, legal proceedings and more
• Meant for full public disclosure; Sinha invites business chambers to help draft format
• Says prefers consensus to force but refusal not an option; Sebi wants to put this into effect in the near future
• Also says working on guidelines to check wilful defaulters on loans

This memorandum, the format for which is in the works, will include a description of the risk factors for the company and the segment. It will contain management discussion, legal proceedings initiated during the year and any other material event.

Sinha said such an integrated statement was the next step in the evolution of reporting and marked a fundamental change in the way companies should communicate with stakeholders. He added the idea was to urge companies along this line, rather than compelling them in this regard. “We will be,” he promised, “working along with industry to know in an incremental manner about integrated reporting, rather than forcing something from our own side.”

Not doing so, he emphasised, was not an option. “Whether integrated reporting should happen or not is no longer a question. We should look on how to implement in a manner not disruptive.”

He invited CII to develop a road map on integrated reporting for discussion with Sebi. He stressed on the need to first create an awareness and build an environment conducive for integrated reporting. This, he said, was based on Sebi's experience on gradually improving transparency via various clauses of the listing agreement.

Wilful defaults
Later, speaking on the sidelines to reporters, Sinha said, “We are working on the guidelines for wilful defaulters. It will take some time.” At present, he noted, there were no restrictions on wilful defaulters from raising funds.

Earlier this month, United Bank of India had declared Kingfisher Airlines and its promoter, Vijay Mallya, with three other directors on the grounded carrier, all as wilful defaulters. This would mean they would be stopped from borrowing from banks in the future and also be liable for criminal proceedings to recover the money.

The Union government is also planning an enactment on this issue. Stringent action against such defaulters in terms of attachment of properties under the Securitisation and reconstruction of financial assets, etc, Act, a change in management and other legal action against the promoters, are under consideration. The department of financial services has set up a panel for suggesting changes in the existing laws to make debt recovery more effective and to frame a statute with harsh penal provisions for wilful defaulters.

(With inputs from PTI)