Introduction

In the securities market, shareholders rely on the disclosures made by entities to the bourses for information. However, the lack of standardization in these disclosures can lead to misinterpretation and confusion. This article explores the need for standardization to ensure comparability and enhance understanding of information in the securities market.

The Role of Standardization

Standardization plays a crucial role in ensuring clarity and comparability of information. Just like accounting standards provide certainty and comparability in financial statements, standardized practices in disclosures can offer investors confidence in interpreting the available information. When practices and interpretations differ, it becomes challenging to assess the relative impact and implication of material events. Therefore, standardization can greatly improve understanding and reliability of disclosures in the securities market.

The Initiative by Sebi

Recognizing the need for standardization, the Securities and Exchange Board of India (Sebi) has proposed the formation of an industry standards forum. The forum, consisting of industry associations like Assocham, Ficci, and CII, aims to collaborate with the regulator, industry, and stakeholders to formulate standards for compliance processes in specific Sebi requirements.

Focus Areas and Potential Standards

The forum’s initial focus will be on four areas:

1. Rumor Verification: Standards can be established to ensure continuous monitoring of media, both mainstream and digital, and issuance of clarifications within 24 hours of reported events. This would involve fixing responsibility, verifying information internally, involving all departments, and avoiding miscommunication.
2. Disclosure under Regulation 30: While Sebi’s circular outlines basic requirements for material event disclosures, standards can provide further guidance on defining material events. This is crucial as many companies currently adhere to a tick-box approach, limiting the effectiveness of the disclosure.
3. BRSR Core/ESG Assurance Requirements: Standards are needed for the collection, collation, measurement, and disclosure of data related to ESG reporting. This includes determining who can act as assurance providers to ensure reasonable assurance of the nine key metrics mandated by Sebi.
4. Structured Digital Database (SDD): Standards should facilitate clear identification of individuals with whom insider information is shared, emphasizing the importance of sharing information on a need-to-know basis.

Conclusion

Standardization in securities market disclosures is essential for improving comparability and understanding of information. Sebi’s proposal to form an industry standards forum is a positive step in the right direction. By collaborating with industry associations and stakeholders, the forum can develop much-needed standards to enhance reliability and clarity in the securities market, providing investors with the confidence they need.

Disclaimer:

The information provided in this article is based on the latest Acts, Rules, Circulars, Notifications, Provisions, Press Releases, and other applicable material available at the time of compilation. We have diligently ensured the completeness and accuracy of the material. However, it is essential for users to consult the relevant legislation for specific guidance. Please note that the data provided may be subject to change without prior notice and should not be considered as professional advice. Estabizz Fintech holds no liability for any outcomes resulting from the use of this material.