Sebi prescribes system-driven disclosures in securities market

Capital market regulator Securities and Exchange Board of India (Sebi) has revised disclosure requirements relating to acquisition, sale and pledge of securities under the Sebi (Substantial Acquisition of Shares and Takeovers) Regulations, 2011 (SAST Regulations) and Sebi (Prohibition of Insider Trading) Regulations, 2015 (PIT Regulations) in order to bring in transparency and promote orderly conduct in the market.

Since the stock exchanges, depositories and registrar and share transfer agents (RTAs) have adopted advanced systems and technologies, Sebi said, it has decided to explore the possibility of disclosing such information based on these systems.

However, Sebi said, since the entire information as required under the current disclosure obligations is not available in the current systems (e.g. details of instruments other than equity shares, PACs etc), the proposed system will be implemented in phases. In the first phase, the systems will require disclosure of the changes in shareholding of promoter/promoter group of the listed entities.

The disclosures in the first phase will pertain to acquisition/disposal of equity shares by promoters/promoter group based on specified thresholds under the SAST Regulations and PIT Regulations and pledge of equity shares by promoters/promoter group under the SAST Regulations.

Initially, this system will run parallel with the existing system, ie, the promoters/promoter group will continue to comply with the disclosure obligations as applicable to them.

Based on the experience gained in the first phase, subsequent phase(s) would be implemented to include the information for non-promoters and instruments other than equity shares.

Sebi has directed listed entities, RTAs, depositories and exchanges to make necessary arrangements in their systems so that the first phase is implemented from 1 January 2016.

The first step would be to build an accurate database of the existing holdings at ISIN level of all the promoters / promoter group. The listed company through its RTA will be required to provide to the depositories the information about promoters and promoter groups of the companies. Sebi has directed listed companies to provide the authenticated information to the RTAs within 15 days, ie, latest by 15 December.

The information provided by the RTAs to the depositories should be in the manner prescribed by depositories and must also include the PAN of the promoter/promoter group. In respect of PAN exempt entities, the account numbers will be provided.

Based on the PAN/account numbers, the depositories will tag such demat accounts in their depository systems at ISIN level as of the promoter/promoter group.

In case of any subsequent changes in the promoter or promoter group of the listed company, the company through RTA should provide the information of the new promoter(s) to the depositories.

In respect of the identified promoters and promoter groups for an ISIN, the respective depositories will generate the required information and send it to the RTAs on a daily basis at the end of each working day.

The RTAs will then aggregate the dematerialised shareholding data received from both the depositories and the physical shareholding of the promoter/promoter group. Based on the defined criteria as per the regulations (eg, aggregate holding of a promoter across both depositories and physical shareholding exceed a specified percentage or value), the RTAs will generate reports and provide it to the respective stock exchange(s). The stock exchanges will then disseminate the data on its website in accordance with the respective regulations.

The RTAs may then check the disclosures made by the promoter entities as per the current regulatory requirements and match the same with the disclosure generated by the systems so that any discrepancies may be found and necessary action taken for rectification of the same. The promoters or members of the promoter group must also take up the issue of discrepancy with the respective stock exchanges which may then be communicated to the respective RTA.