25 June 2009

Rationalising rights issue disclosures

This week SEBI Board also rationalised the disclosures for rights issues based on the existence of continuous disclosures. Though perhaps in the right direction, there is danger in this half baked approach of improving rights transactions without fixing the problem of improved continuous disclosure by companies of information. Here is my post of the 13th March 2009 discussing the issue:

"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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