MUMBAI, April 12: Senior officials of a company should be held personally responsible and penalised for the failure of a company to make adequate disclosures to the stock exchanges, says National Stock Exchange (NSE) managing director, RH Patil. Patil's remarks come in the wake of a near helplessness by the country's largest stock exchange to even question a company on its failure to disclose information on time."Exchanges today have no powers to crack down on errant companies. They are in fact, contrary to popular belief, not even vested with the powers to delist a company. Changes need to be made in the Companies Act to put in place stringent penalties on companies as well as their top brass for failure to provide adequate information", said Patil. More than half the companies traded at the exchange are on the permitted to trade segment of the bourse and are hence not bound by any listing agreement which makes it mandatory on companies to disclose information.
"Apart from this drawback, the harshreality is that even if the companies were on the listed segment there is little that an exchange could do to ensure that the disclosures are made to investors. A company can merely be suspended and not delisted by an exchange", said Patil.
"The need of the hour is to make the legislative changes and vest the powers to take action on errant companies solely on Sebi. Even stock exchanges should stay out of it or else you would have a case of several stock exchanges chasing the same company, leading to unecessary duplication", said Patil. NSE has meanwhile started writing to companies to move away from the permitted category to the listed category. "Atleast if they are in this category some of them would be drawn towards making disclosures voluntarily", said Patil. NSE sources, however, said that the response to the NSE initiative has been lukewarm. "Can you imagine that some top companies are not willing to pay the listing fee of Rs 10,000 or so to get themselves listed at the bourse and thus be bound by anagreement, even though fragile, to provide information to investors", said a senior NSE official.
"We on our part are trying to get as much of information on corporates from information vendors and the media and passing it down to our members. At this point of time, there is nothing more that we can do", said Patil.
In the latest case of Nestle allegedly failing to provide information to stock exchanges on time, NSE had expressed helplessness in pulling up the company as it is on the permitted category.
"A detailed disclosure format needs to be evolved in the country. What is to be disclosed is one thing, but how this information is to reach not just the brokers, but also investors is quite another", said a senior NSE official.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
