Bottomline | SEBI ticks the right boxes, but…

Similarly, in instances of regulatory actions like I-T searches or regulatory inspections and actions, an obligation to confirm or deny can go a significant way in providing transparency. Incidents like fire accidents or manpower agitation etc are others where timely dissemination of information can be useful.

There could also be legal developments in India or overseas with significant implications that a timely reply from a company can help offer the right perspective on. Thus, the pros outweigh the cons, and some opacity in particular situations as warranted may continue, but that’s a business necessity.

It is always good to bring objectivity, read “quantification”, to determining what should be considered material to shareholders’ interests. The rub lies in the assessment of the impact. For news that has a clear and direct bearing on financial aspects or shareholder value of a business, like sales and profits, or equity dilution, such a definition is perfect.

The problem arises when the outcome of a certain development needs to be projected as above or below the indicated threshold. Will companies choose to disclose even less material information, so as not to run afoul of the law or will some choose to underplay adverse events claiming the outcomes will be muted? This remains a tricky aspect.

If, for instance, a company enters into an alliance with another to co-develop a certain product or offer a certain service, its expectation of what the arrangement can deliver will drive the decision to disclose or not disclose. But what will finally be delivered, only time will tell.

Clearly, SEBI is on the right path to address the key ills that ail the capital markets, but there will likely be hurdles along the way and what’s most important is for it to stay on the path. What it shoots for may not be easily achieved, but making significant headway is also an achievement.

As an investor, I’m cheered by more disclosures.