Sebi targets analyst meets, proposes steps to curb information asymmetry

The Securities and Exchange Board of India (Sebi) has proposed slew of measures to curb information asymmetry arising from analyst meets and conference calls conducted by listed companies.

Companies will now, according to the markets regulator, need to make audio/video recordings of all such meetings, which should be made available on their website and on stock exchanges within 24 hours of the event taking place.

However, if companies discuss any unpublished price-sensitive information (UPSI) at such meetings, the same needs to be disclosed immediately to the public at large, the regulator pointed out.

Entities will have to prepare written transcripts of such calls, which should be made available within 5 working days after the earnings call. These files should be archived on the company’s website for at least eight years, Sebi has proposed. It is a fairly common practice for firms to conduct analyst meets or to participate in investor conferences, where participation is restricted. Industry players said such platforms have gained prominence as means of communication and sharing of information with large institutional shareholders.

Many of them even conduct one-to-one meets with select investors.

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“Listed companies to provide number of one-to-one meetings with select investors as part of corporate governance report submitted by them to stock exchanges on a quarterly basis, along with affirmation that no UPSI was shared by any official of the company in such meetings. Company shall maintain a record of all such one-to-one meetings, as the same could be required for future reference. The data should be preserved for a period of at least eight years,” reads the Sebi proposal.

These recommendations have been made by an expert group set up by Sebi under the leadership of Keki Mistry, chief executive officer of HDFC. The brief given to the committee was to address concerns surrounding information asymmetry rising out of such meets. “It is noticed that while many listed firms disclose the occurrence of institutional investors meet or conference call with analysts, they do not divulge details of what transpired in such meetings. Minority shareholders, who do not attend these meetings, are not privy to information shared with a select group of investors, thereby creating information asymmetry among different classes of shareholders,” Sebi said in the discussion paper.

Experts said the measures proposed by Sebi would help reduce the information gap between institutional investors and small shareholders. The regulator has invited comments from the public on various proposals until December 21. Based on the feedback, it will finalise the norms.

New rules

• UPSI to be disclosed immediately to public at large
• Provide written transcripts in five days
• Maintain archive for such transcripts for at least 8 years
• Cos allowed to decide if conference calls open to everyone or existing shareholders
• No sharing of UPSI in one-to-one meets