Consolidating Secondary Market Disclosures

(This post has been authored by, and is uploaded on behalf of, Professor Umakanth)

As we have previously observed on this
Blog, there is a considerable divergence between the requirements of disclosure
in the primary markets and those in the secondary markets. While SEBI has
progressively expanded the requirements of primary market disclosures through
the SEBI (Issue of Capital and Disclosure Requirements) Regulations, 2009 (the
ICDR Regulations), the disclosure norms are far less onerous once a company is
listed on the stock exchange. While episodic disclosures are required to be
made by companies upon the occurrence of material events that affect the price
of their securities and periodic disclosures are to be made such as the
announcement of quarterly results and decisions at board meetings, these
requirements are considerably lighter than those prescribed for primary market
transactions. Moreover, the regulations and liability regime for misstatements
in secondary market disclosures are far from clear.
Due to this disparity, there have been calls for
the introduction of an integrated disclosure regime in India through
standardizing and streamlining the corporate disclosures by integrating initial
disclosures made under a primary market offering document with continuous
disclosure requirements thereafter. Although SEBI has considered
this issue based on the recommendations of a Sub-Committee appointed by it for
the purpose, much progress had not been made towards the integration of the
primary and secondary market disclosures in India. The latest
towards improving the enforcement of secondary market disclosures is
by empowering the stock exchanges to take action against errant issuers. The
impact of this measure is yet to be known, as it is a fairly recent one.
In this background, it is heartening to
note SEBI latest discussion
issued yesterday that requires companies listed on the stock
exchanges to provide an annual information memorandum where all secondary
market disclosures are to be available in a single source on a consolidated
basis. This will overcome the current fragmented and episodic reporting that is
witnessed in the markets. The discussion paper contains details about the
rationale for the annual information memorandum and also an analysis of the
experience in other countries, particularly the US.
Currently, the proposal is only in the form
of a discussion paper, with comments due by March 9, 2014. It is hoped that
these measures will be operationalized soon so as to bridge the gap between
primary market and secondary market disclosures, which has been long overdue in
the Indian context.

About the author

V. Niranjan

1 comment

  • Morning Musings >
    "…… bridge the gap between primary market and secondary market disclosures, which has been long overdue in the Indian context. "

    To ponder:Is "disclosures" spoken of ,the end itself, or merely means to an end !is not the 'gap' a cavernous GAP ?

    The Proof of the Pudding Is in the Eating !- If reflected on , that has two facets- one is, how Good is the Pudding; and the other is, how Good is the eater !! That is, in essence, dependent on the mental make-up, individual taste, and capability of the eater to discern what is good or otherwise. Examine , for a change, wrt the so-called 'junk food' !

    Same way, whatever be the norms, regulatory measures , so on, conceived by SEBI, granting the sincerity behind, and announced almost as a continuous process in the recent years, going simply by diktats of common sense, could not, for easily infer-able reasons, be expected to , if not work wonders, to usher in a marked improvement. without a close monitoring of the field realities; that is, effectiveness or otherwise, as evidenced by the compliance part of the whole exercise. If intuitively perceived, perhaps, there can be no two views that the concept of compliance means and necessarily entails self-discipline -willingness and commitment, on the part of the players – both promoters and stakeholders,, be it at the 'primary' or 'secondary' – stage , to try and adopt a public-centric attitude, as opposed to self-centric ….

    To consider : Has not time come to think of more stringent norms and measures to regulate the 'secondary' market , in preference to 'primary' market ; if so thought fit from a pure psychic angle, by an interchange of the two prefixes !

    Also consider: Has not the proverbial Moment of Truth*, – time to recognise it-HATH COME!

    *To intimately know what that historical phrase implies/means, may have to look up-The moment of truth posted by Marky Mark; further, the informative reply by Victoria S Dennis @

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