SEBI Whole Time Member Flags Concern Over Valuation Practices

The Securities and Exchange Board of India's Whole Time Member, Ananth Narayan, raised concerns over valuations of assets, while speaking at an event in Mumbai on Friday.

Valuations needing more attention, according to him. He pointed out concerns such as potential conflicts of interest where valuers are paid by entities whose assets they assess, the risk of 'valuation shopping', limited disclosure of assumptions, and lack of accountability for significant deviations.

Lessons from the credit rating industry could be applied here, including the disclosure of assumptions, sensitivity ranges, and track records, according to him.

He offered two practical suggestions to CFOs. First, to deepen engagement between CFOs, audit committees, and auditors, particularly in planning and regular meetings.

Second, to reduce the time lag between annual results and full annual reports, which currently ranges from 70 to 140 days. Earlier availability of complete information, including notes to accounts and audit disclosures, would improve transparency for investors, according to Narayan.

He encouraged CFOs and auditors to play an active role in creating fair and balanced rules. SEBI's regulatory mechanisms—such as advisory committees, public consultations, and working groups—were designed to include industry inputs. CFOs should organise themselves for formal representation, he suggested.

He urged CFOs to be proactive trust advocates. This included reporting irregularities and contributing to discussions on regulatory reform while considering the trade-offs involved.

Narayan also reiterated that SEBI's enforcement actions are evidence-based and must meet the threshold of preponderance of probability.