Sebi Proposes New Rules for Easier Compliance on Non-Convertible Securities After Nirmala Sitharaman’s Push for Reforms

The Securities and Exchange Board of India (Sebi) has proposed new rules to make compliance easier for companies that have listed non-convertible securities. This is part of an effort to promote ease of doing business in the financial sector.

The market regulator released a consultation paper on Friday, asking for feedback on several proposals, including changes related to the approval and signing of financial results for entities with listed non-convertible securities. These proposals aim to align the rules with those that already apply to companies with listed equity.

Proposed Changes for Approval

According to the proposed rules, quarterly financial results submitted by companies must be approved by the board of directors. The financial results that are submitted to the stock exchanges should be signed by the chairperson, managing director, or a whole-time director. If none of these individuals are available, the results can be signed by another director who has been authorised by the board to do so.

Current Regulation vs Proposed Regulation

Currently, the regulation for companies with listed non-convertible securities requires that the quarterly results be acknowledged by the board of directors and signed by the managing director or executive director. The rules for companies with listed equity securities, however, are more detailed. They require the board’s approval and the signature of either the chairperson, managing director, whole-time director, or any other authorised director if the first three are not available. The new proposal aims to bring the requirements for non-convertible securities in line with these existing equity regulations.

Budget Announcement

This move comes after Finance Minister Nirmala Sitharaman announced in the FY2023-24 Budget the need to simplify, ease, and reduce the cost of compliance for financial sector participants. Following this, Sebi created several working groups to suggest ways to make compliance easier across its various regulations.

Aligning Fraud Disclosure Rules for Debt and Equity

One of the proposals from these groups is to align the rules regarding the disclosure of fraud or defaults for companies with listed non-convertible securities with those that apply to companies with listed equity securities. The committee has also recommended adopting a common definition of “fraud” for both debt and equity-listed companies.

Reduction in Timeline

Additionally, Sebi has suggested reducing the timeline for informing stock exchanges about record dates for companies with listed non-convertible securities. Currently, companies are required to give at least seven working days’ notice. The new proposal would reduce this to at least three working days.

XBRL Filing

Another proposal in the consultation paper is to require companies with listed non-convertible securities to file all their disclosures with stock exchanges in the XBRL (Extensible Business Reporting Language) format, which is already a requirement for companies with listed equity securities.

Public Feedback

Sebi is now inviting feedback from the public on these proposed changes. The aim is to make compliance simpler and more streamlined for companies while maintaining transparency and integrity in financial reporting.