13 March 2009

Reduced disclosures for rights issues - SEBI discussion paper

SEBI has put out a "Discussion paper on rationalisation of disclosure norms for Rights Issues". In brief, the paper seeks to reduce the disclosures by companies seeking to come out with a rights issue based on the recommendations of the disclosure advisory committee of SEBI. This is a flawed recommendation as it seeks to reduce disclosures in rights offerings - assuming a high quality of continuous disclosures by companies. In fact the quality of continuous disclosures by companies is poor because of the poor design of the fragmented disclosure regime - not because companies (even blue chip ones) don't want to properly disclose. This was sought to be remedied by introducing a far superior form of continuous 'integrated disclosures' by the same committee. Without implementing that recommendation, implementing the present proposal will be dangerous as it reduces net disclosures.

PS: See my previous post on integrated disclosures.

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