SEBI plans more disclosures for conglomerates, unlisted firms

The country’s markets regulator plans to change its rules to force unlisted companies to make more disclosures, including on related-party and financial transactions at the group, or conglomerate level, the regulator said on Monday.

Private companies are not required to make rigorous disclosures related to their financials or other material changes in the same way public companies are. This also applies to conglomerates that may have both listed and unlisted units.

The Securities and Exchange Board of India (SEBI) plans to review and standardise disclosures in public offer documents issued by private and listed companies, it said in its annual report that included a draft of other reviews.

"There is a need to identify, monitor and manage the risks introduced into the securities market ecosystem by unlisted companies in a conglomerate with a complex set of listed and unlisted associates," said SEBI.

Currently, there is no public disclosure of all related-party transactions at a conglomerate level, said Sai Venkateshwaran, a partner at KPMG.

"The plan from SEBI to enhance transparency through reporting of transactions at a conglomerate level may not be achievable by the listed company on its own and will certainly require the active involvement of the promoter group (major shareholder).

SEBI also said that group-level disclosures could be made mandatory around cross holdings - where a publicly-traded company owns stock in another publicly-traded company.

This fiscal, the regulator will also change what constitutes unpublished price-sensitive information (UPSI) to prevent insider trading.

Currently, the listed entity has the onus of categorizing information as UPSI. But, SEBI said, it has come across several instances where information that ideally should have been disclosed as UPSI was not made public.

The regulator also plans to review the eligibility criteria for the introduction and continuation of stocks in the derivatives segment.

Since its last review in 2018, the broad market parameters reflecting the size, liquidity of the cash market, market capitalisation and turnover have "changed considerably," SEBI said.

The regulator is also reviewing its takeover code, which governs mergers and acquisitions, to align it with global standards on the basis of how its orders have been viewed by appeals tribunal and the Supreme Court.

The last review was done in 2009.