SEBI to Introduce Revised Disclosure Norms for Related Party Transactions
In a move to enhance transparency and governance in the corporate sector, the Securities and Exchange Board of India (SEBI) is set to introduce revised disclosure norms for related party transactions (RPTs) for publicly listed companies. The announcement was made by SEBI Chairperson, Madhabi Puri Buch, during the launch of a cutting-edge related party transactions (RPT) analysis portal. This initiative comes at a crucial time when regulatory bodies are focusing on boosting investor confidence and ensuring fair practices in the market.
RPTs, which involve business deals between parties with a pre-existing connection, are legal transactions that can potentially raise concerns about conflicts of interest. To address these issues, SEBI, in collaboration with industry associations such as ASSOCHAM, CII, and FICCI, has developed minimum disclosure requirements for companies seeking approval for RPTs. These disclosures are essential for both the audit committee and shareholders to evaluate the fairness and implications of such transactions.
The RPT portal, created through a partnership with advisory firms InGovern Research Services, Institutional Investor Advisory Services (IiAS), and Stakeholder Empowerment Services (SES), serves as a centralized platform for investors to analyze and compare transactions across companies. By providing comprehensive information about RPTs, the portal empowers investors to make well-informed decisions and ensures that the market accurately reflects the true nature of a company.
Madhabi Puri Buch, SEBI Chairperson, emphasized the significance of transparency in related party transactions, stating, “If there’s one thing that’s really important, it is looking at and ensuring the governance around related party transactions.” She highlighted the strategic importance of RPTs to companies while stressing the need to safeguard against potential fraud and conflicts of interest.
Ashwani Bhatia, a whole-time member of SEBI, likened the RPT portal to sunlight that exposes hidden dealings within corporate boardrooms. He emphasized the role of the portal in promoting higher governance standards and ethical practices among companies. Bhatia underscored the importance of conducting RPT transactions at arm’s length and ensuring fair pricing to protect the interests of public shareholders and maintain market integrity.
According to Bhatia, lapses in governance related to RPTs not only erode investor confidence but also cast a shadow on the reputation of the corporate sector as a whole. He warned that while governance deficiencies might go unnoticed during bullish market conditions, they could have detrimental effects once market sentiment shifts, leading to widespread repercussions for investors and stakeholders.
The RPT portal is expected to serve as a valuable tool for mutual funds and other investors to advocate for improved governance practices and accountability from the companies in which they invest. By shedding light on related party transactions and providing a framework for evaluating their fairness, the portal aims to foster a culture of transparency and integrity in the corporate landscape.
In conclusion, SEBI’s initiative to revamp disclosure norms for related party transactions marks a significant step towards promoting ethical conduct, accountability, and investor protection in the Indian capital market. Through the implementation of stringent disclosure requirements and the introduction of the RPT analysis portal, SEBI aims to instill trust and confidence among investors while upholding the highest standards of corporate governance.