Two SEBI consultation papers seek to make the market deeper and more transparent
The stock market regulator has been on an overdrive, releasing a slew of discussion papers on issues that, while not exigent, are nevertheless important for the efficient functioning of the market. Two of these — relating to decreasing the offer size in large issuances and addressing the information asymmetry in disclosure by listed companies — can help broaden the market and enhance the trust of market participants in the system. SEBI’s proposal to reduce the public offer in large issuances where the post-issue market capitalisation exceeds ₹10,000 crore to 5 per cent from the current 10 per cent can pave the way for larger companies approaching the capital market more readily. Large offers have been few in recent past and the regulator needs to encourage such issues to deepen the market. The regulator can, however, lay down some rules regarding the minimum number of shareholders and the proportion of shares to be held by retail investors to ensure that the company’s stock is liquid enough.
Requiring the audio or video recording of the post-earnings conference call to be uploaded on the website and disclosed to stock exchanges before the next trading day is a good move as it can prevent trading based on information leaked at these calls. But SEBI should not leave the decision — whether to let everyone attend these conference calls or to limit it to their shareholders — to the companies. Most companies are likely to adopt the latter option, thus continuing the opacity. SEBI should enforce global best practices in opening these conference calls to everyone. Also, allowing listed companies to just give the number of one-to-one meetings with select investors every quarter, along with a disclaimer that no price sensitive information was divulged, is not satisfactory. Such meetings should be disallowed if the content is not made public. Free availability of information, is after all, essential for protecting the interests of the small investors and for efficient price discovery.
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