Exchanges go real-time in pulling up firms for non-disclosure

As regulators tighten their noose to check manipulative activities undertaken through "select leak" of price sensitive information, stock exchanges have begun pulling up listed companies on a real-time basis for any suspected non-disclosure of important developments.

A large number of cases have come to notice of the capital markets watchdog Sebi and stock exchanges, who act as front-line regulators, wherein undue benefits have been made by entities with vested interests through "select leak" of key information as also by "planting" of wrong information.

Such entities include those linked to promoters or key management personnel, brokers, merchant bankers and many others, sources said, while adding that the regulators are initially adopting a "soft warning" approach in most cases as amounts involved are relatively small.

However, harsher measures, including monetary penalties and penal actions like freezing of benefits and eventually trading suspension, follow for those indulging in deliberate violations of norms, they added.

To check these practices, the stock exchanges have begun a real-time monitoring of all price-sensitive information in the marketplace about listed companies to ascertain whether those have been disclosed duly under regulatory framework by the concerned entity for the benefit of investors.

In case the exchanges suspect such information to have reached the marketplace, including through media, on a "select leak" basis or in case of wrong information being "planted" to mislead the investors, the companies are being issued "soft" clarificatory notices on a real time basis.

If the response is not forthcoming from the concerned company as also in case of reply being unsatisfactory, the matters are investigated further.

In these notices, exchanges are seeking clarifications from the listed companies about reasons behind significant price/volume movement in their share prices, as also to verify news articles appearing in the news papers, websites, TV channels and at other forums regarding them.

The companies that have been issued such notices include a host of smaller companies, as also many blue-chip firms.

This follows a significant tightening of rules governing disclosure of key information by listed companies to investors through the stock exchange platform, while a further tightening of regulations is expected next week when Sebi is likely to come out with a new set of Listing Regulations.

To ensure timely and correct disclosure of price- sensitive information and other key details by listed firms for benefit of investors, leading bourses BSE and NSE have also issued detailed 'guidance notes' for such disclosures.

Sebi Chairman U K Sinha has also said that strict action would be taken against entities that violate listing norms.

"Our attempt now is that we will first see that there is penalty on the company, there is a penalty on the directors and how we can deprive the promoters of the company from getting economic benefits. As a last resort, we will go for suspension of trading," he said recently.