Sebi to overhaul disclosure norms for tighter leash on insider trading

New norms to reduce compliance burden on individuals and companies, use technology for automatic integration of information from all sources

To strengthen its real-time monitoring of insider trading cases and detect other corporate governance related lapses, regulator Sebi will soon put in place a 'system-driven disclosure regime' for listed companies and their top officials.

The new set of norms will also help reduce the compliance burden on individuals and the companies, as disclosures made under different regulations would be integrated to the extent possible so as to reduce the number of times the same disclosure is required to be made.

The new system would use technology for automatic gathering and integration of information from all available sources, a senior official said.

It follows recommendations made by Sebi's International Advisory Board that 'system-driven disclosures' can significantly help in monitoring compliance even while reducing the burden of compliance on individuals.

"To begin with, disclosures made under different regulations may be integrated to the extent possible so as to reduce the number of times the same disclosure is required to be made by an individual," it had recommended.

A working group formed by Sebi in now the process of finalising its report, on the basis of its feasibility study on the proposed system-driven disclosure regime wherein the onus of disclosures will shift from the individuals or companies to the systems in place.

Additionally, Sebi has also set up a Committee for reviewing the disclosures and application form in public issues with an objective to revisit the adequacy and quality of disclosures made along with the application form (including prospectus and abridged prospectus).

It is also reviewing the structure, design, format, contents and order of information from the point of ensuring that the materially important information is provided in a structured and user-friendly manner.

Further, Sebi is also revising the provisions for continuous disclosure requirements under listing agreement.

A discussion paper in this regard was put up by Sebi for public comments. Pursuant to examination of public comments, discussion with industry bodies, stock exchanges, academic bodies and other market participants, the revised provisions for continuous disclosures have been approved by the Sebi board.

These provisions are now in the process of being incorporated in the proposed Listing Regulations which are nearing notification.

The new system is expected to enable the investors to make well informed investment decisions. Apart from dissemination of information on an ongoing basis, this would also result in better price discovery and reduce the likelihood of manipulation and insider trading in the market.

Besides strengthening the monitoring of listed companies including implementation of Sebi norms for Corporate Governance, the regulator is also undertaking measures to create awareness amongst listed companies for ensuring better compliance culture.