SEBI Consultation Paper on Review of disclosure requirements for material events or information under SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 – November 12, 2022

SEBI vide its Consultation Paper dated November 12, 2022 made review on disclosure requirements for material events or information as required under Regulation 30 of SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015.

Regulation 30 of LODR Regulations, requires listed entities to disclose material events or information to the stock exchanges.

Background and need for review :

In the recent years, SEBI has been receiving many complaints / references regarding inadequate / inaccurate / misleading / delayed disclosures made by the listed entities. Listed entities from their end have also expressed that uniformity in the guidance to the listed entities is required for determining materiality of events or information. While the regulatory actions against non-disclosure of material events or information act as a deterrent, it cannot undermine the importance of ensuring timely disclosure of material events by all listed entities at all times.

It is also observed that while timelines have been specified under various provisions of the LODR for dissemination of information, there have been frequent non-compliances of such timelines by the listed entities thereby inviting fines/penalties. Needless to emphasize here is that timely dissemination of information would help in reducing information asymmetry.

Highlights of Proposals made by SEBI :

Guidelines for materiality for events specified under Para B:

Materiality Threshold : It is proposed that the listed entities shall disclose an event or information specified under Para B whose threshold value or the expected impact in terms of value exceeds the lower of the following:

two percent of turnover, as per the last audited standalone financial statements of the listed entity;

two percent of net worth, as per the last audited standalone financial statements of the listed entity;

five percent of three-year average of absolute value of profit/loss after tax, as per the last three audited standalone financial statements of the listed entity.

Materiality Policy : It is proposed to specify the following under clause (ii) of regulation 30(4) of LODR Regulations:

Materiality Policy of the listed entity shall not dilute any requirements specified under this regulation.

Materiality Policy of the listed entity shall be framed in a manner so as to assist employees