Millennium Post

Sebi panel moots separate governance norms for big biz

To ensure focused enforcement of corporate governance norms, capital market watchdog Sebi's International Advisory Board has suggested separate governance standards for ‘big and complex business groups’.

The suggestion comes at a time when India is gearing up for revised norms on various aspects of corporate governance including those pertaining to related party transactions and independent directors.

Besides, the International Advisory Board (IAB) has proposed the integration of disclosures made by entities under different regulations to reduce the number of times the same disclosure is to be made by an individual.

These proposals were deliberated upon during the fourth meeting of the International Advisory Board (IAB) held on 18 and 19 July.

With regard to corporate governance norms, IAB concurred with Securities and Exchange Board of India's (Sebi) approach and said there was a need to address the gap in what is reported by auditors and what investors, across jurisdictions, expect.

‘Also, it was suggested that there needs to be different governance standards for big and complex business groups, with too many subsidiaries. ‘A more focused enforcement of corporate governance norms was emphasised by the IAB so as to derive the true benefit of the prescribed norms,’ Sebi said in a statement today.

With regard to proposed norms for crowd funding, IAB said that Sebi needs to undertake a more detailed study and should also take into account issues like ‘fraudulent conveyance in crowd funding and the likelihood of equity bubbles’.

It was also suggested that the involvement of government in the financing of SMEs, start-ups and infrastructure projects, at least in the initial stage, is very crucial.

Besides, IAB proposed institutional deepening which can be achieved by regulatory reforms, ‘such as relaxing portfolio restrictions on pension and insurance funds as well as private equity and venture capital funds, etc’, the statement said.

‘It was suggested that specifically the regulation and tax should be neutral between debt vs equity...,’ it added. On legislative recommendations of Financial Sector Legislative Reforms Commission (FSLRC), the advisory group observed that it was difficult to design a regulatory architecture that is suitable for all future market developments.

‘... FSLRC recommendations are very detailed in nature and that their implementation raises policy issues which can be addressed by the government and the Parliament. Whatever be the decision there, capacity building and transition issues need to be given highest priority.

‘IAB also felt that principles recommended by FSLRC, such as transparency and consultation in regulation making, cost-benefit analysis, etc are subjects which should be 
adopted by the regulators,’ the statement said.

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