BSE issues guidance note on price-sensitive disclosures

To ensure timely and correct disclosure of all price-sensitive information and other material details by listed companies for benefit of investors, leading bourse BSE has issued a detailed 'guidance note' for such disclosures.

It is mandatory for all listed companies to immediately inform the exchange about all material and/or price sensitive events, which could have a bearing on the performance, operations or price of the company or its shares.

An indicative list of such material events forms part of the Listing Agreement between the BSE and the companies that list their shares on the exchange's platform.

These details need to be disclosed as per Clause 36 of the Listing Agreement.

"In order to assist and guide companies in understanding which events need to be disclosed and what would constitute relevant details with respect to the obligation for making continuous disclosures as per Clause 36 of the Listing Agreement, a Guidance Note has been compiled," BSE said in a circular.

"Going forward companies are requested to be guided by the points included in the said note - it may be noted that this note is merely a guidance and not an exclusive list of events or details.

"The companies are urged to submit comprehensive disclosures relating to material events, as they develop or crystallise, from time to time," it added.

A similar circular has been issued by another leading bourse NSE as well with its own guidance note on such disclosures.

As per BSE's guidance note, the indicative list of material events on which listed entities are required to make disclosures to the exchange include -- events such as strikes, lock-outs, closure on account of power cuts, etc, change in the general character or nature of business and disruption of operations due to natural calamity.

Such events also include commencement of Commercial Production or operations, developments with respect to pricing/realisation arising out of change in the regulatory framework litigation / dispute with a material impact, revision in ratings, as also any other information having bearing on the operation/performance of the listed entity as well as price sensitive information.

BSE said that "it is observed that, in the absence of any standard or guidance on fair disclosures for the appreciation/ assessment of the event by investors/shareholders, companies are furnishing varying details in their disclosures for similar events.

"Such variations are not helpful to investors to set their expectations on the information content in the disclosures under Clause 36 and therefore it is felt necessary to issue this guidance note to help companies to make comprehensive disclosures relating to indicative list of material events given in the current Clause 36," it added.

BSE CEO Ashish Chauhan recently said that such a guidance note will help the companies to understand beforehand what kinds of disclosures they are required to make for investors to take informed decisions and would help remove ambiguities and avoid unnecessary trouble for companies at a later stage.

As per BSE's eight-page guidance note, every listed company should have aa policy determining an authority within the company that is entitled to take a view on the materiality of an event that qualifies for disclosure.

It also prescribes the nature, quantum and periodicity of disclosures that the companies need to make in different scenarios, such as in the case of change in business, natural calamity, impact of strikes or lock-outs, commencement or closure of commercial operations, regulatory actions, disputes, merger or acquisitions, rating changes and issuance of securities, among other important developments.