Sebi working on norms for related-party transactions, says Ajay Tyagi

Topics Sebi | Sebi norms | Ajay Tyagi

Securities Exchange Board of India

The capital markets watchdog Sebi is looking at improving the norms governing related-party transactions for companies, according to the chairman.

In the comments that come weeks after the latest Infosys episode, Sebi chairman Ajay Tyagi on Wednesday said it is "impossible" for the regulator to list out what can be "material" information which it should be mandated to share.

Some listed companies, especially due to their family-driven nature, have been found to be wanting on the related-party transactions.

"Sebi is looking at improving the existing norms on related-party transactions," Tyagi said at an OECD seminar on corporate governance organised by the Sebi.

He explained the increasing prevalence and use of group companies has brought several governance issues to the fore, especially on related party transactions.

"Use of complicated group structures and complex related-party transactions increase the concern on siphoning of funds, money laundering, round tripping etc, while such structures and transactions happen at a cross-country level, the lack of free information flow hinders monitoring and enforcement as well," he said.

Tyagi said Sebi has given its inputs on regulations as a case study on the subject to the OECD and affirmed further support on the same.

Meanwhile, amid the probe into the latest Infosys whistleblower case that came to light early this month, and without mentioning naiming any company, he said its impossible to decide what is material information and therefore, it is better to leave to companies to decide on the same.

But he said lack of disclosures is a "very serious issue" and overlooking any aspect can erode investor wealth.

He also cited the independence of independent directors, especially in companies that are promoter-driven as a regulatory concern.

He said compliance to the corporate governance should be on a principled basis and not merely from a "tick-mark" perspective where a company only looks at mandated requirements.

Protection of minority shareholders' rights is a crucial element for the regulator, but the minority shareholders shouldn't abuse the rights vested under the statutes, Tyagi appealed.

He also said further growth of capital markets is essential given the country's growth needs and exhorted the industry to do all it can.

Dear Reader,

Business Standard has always strived hard to provide up-to-date information and commentary on developments that are of interest to you and have wider political and economic implications for the country and the world. Your encouragement and constant feedback on how to improve our offering have only made our resolve and commitment to these ideals stronger. Even during these difficult times arising out of Covid-19, we continue to remain committed to keeping you informed and updated with credible news, authoritative views and incisive commentary on topical issues of relevance.

We, however, have a request.

As we battle the economic impact of the pandemic, we need your support even more, so that we can continue to offer you more quality content. Our subscription model has seen an encouraging response from many of you, who have subscribed to our online content. More subscription to our online content can only help us achieve the goals of offering you even better and more relevant content. We believe in free, fair and credible journalism. Your support through more subscriptions can help us practise the journalism to which we are committed.

Support quality journalism and subscribe to Business Standard.

Digital Editor

Business Standard is now on Telegram.
For insightful reports and views on business, markets, politics and other issues, subscribe to our official Telegram channel