SEBI Signals Stricter Oversight On Related-Party Transaction Disclosures

The market regulator, the Securities and Exchange Board of India, on Friday approved an Industry Standard Forum for disclosures around related-party transactions, said Chairperson Buch while speaking at an event in Mumbai.

"The industry itself has come up with clear guidelines on the minimum disclosures companies must make when seeking RPT approval—both at the audit committee level and, when required, at the shareholder level," Buch said at the launch of the RPT disclosure website.

The website has been developed by three proxy advisory firms, namely, nGovern Research Services, Institutional Investor Advisory Services (IiAS), and Stakeholder Empowerment Services (SES).

The chairperson even said that she would be ready to throw away the entire listing obligations and disclosure requirements, but governance around related-party transactions should be ensured.

This means that the listed companies may see increased scrutiny over related party transactions.

"We find that the largest number of queries we receive from institutional investors—including foreign investors—are about what SEBI is doing to create more transparency around related-party transactions," Buch further mentioned while explaining the need for more disclosures.

She said that a protected investor is the one who is informed, the responsibility of which falls on the regulator, and hence there is a need for such disclosures.

"Going forward, the quality of information available to audit committee members and public shareholders at the time of approval will be vastly improved. The disclosures will be of an entirely different order of magnitude than what we see today," she said.