The FAQs released by SEBI on the new listing regulations, does not address any of the issues the industry was grappling with
Ever since the Listing Obligations and Disclosure Requirements Regulations, 2015 (LODR or Regulations) has replaced the existing Listing Agreements vide notification on 2 September 2015, followed by circulars of different dates, there are umpteen number of unclear provisions and unanswered questions in the minds of stakeholders.
With such myriad doubts hovering in the mind of the stakeholders, the industry hoped to get some clarity from market regulator Security and Exchange Board of India (SEBI).
After four months of exposure and more than one month of implementation and public debate on the inference of the provisions of grey areas of the Regulations, the SEBI has decided to release the FAQs on LODR
on 8 January 2016.
The three-page FAQs were issued by SEBI to answer questions that have been agitated and debated in about dozens of workshops all over the country. Most of the answers are too obvious. Apart from clarifying on the Regulation 30(9) of the Regulations, which pertains to disclosure of material events of the subsidiary of a listed entity, the FAQs are rather a keepsake and far from addressing any of the issues the industry was grappling with.
Some of the ambiguous provisions of LODR, which require some clarity from the SEBI are as under:
The applicability of the Business Responsibility Report- whether the reporting requirement is from FY2016-17 or FY2017-18;
The applicability of the requirement of disclosing the acquisition of 5% of shares/voting rights in a company or further +/- 2% change by a NBFC or a banking company when such acquisition is pursuant to any CDR/SDR schemes floated by RBI – the same should be exempted by way of a notification;
For the purpose of Regulation 9, which pertains to preservation of documents – the definition of the term “documents” – whether the same is limited to the documents required under LODR or includes documents pertaining to other laws like Companies Act, 2013 as well;
For the purpose of Regulation 30, while the qualitative definition of materiality of event is given, the quantitative definition of the same is left to be inferred from international standards and thumb rule;
Regarding “archival policy” – Except for a mention in regulation 30(8), the Regulations nowhere provides about preparing/adopting of an archival policy. Therefore a listed entity apparently has to have an archival policy. However, there is no clarity on the point that if such entity already have an archival policy in place, whether streamlining the same in line with the regulations will suffice or will such entity have to prepare a new archival policy altogether.
The SEBI circular regarding disclosure of shareholding of a listed entity mentions about disclosing of details of “NBFCs registered with RBI” – it is not possible for a listed entity to know which all shareholders who are NBFCs are registered
These are only a few of such lingering issues. There are more such provisions in the LODR which are left for interpretation by the market participants. The only way to find a conclusion is by way of clarification from SEBI.
(Nitu Poddar is a Company Secretary by qualification and works as Associate at Vinod Kothari & Company)