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Virendra Verma
G. Madhan

MUMBAI/CHENNAI, Dec. 27

THE Securities and Exchange Board of India (SEBI) wants to increase by another 500 the list of companies that would be required to file their annual reports in electronic format with it.

It has recently sent out a communication to the stock exchanges with a list of companies. But as it happens, SEBI still has some distance to go in enforcing compliance with regard to the initial list of companies announced by it in July this year.

Of the 200 companies identified by SEBI for electronic filing of documents under the Electronic Data Information Filing and Retrieval (Edifar) system, annual reports of 122 companies are still not available on its Web site.Market participants attribute this to a lack of proper disclosure norms. They argue that it is as yet unclear how the norms are to be applied and compliance enforced. Should it apply to companies whose accounting year ended on a date after the new stipulations came into force?

Alternatively, should it apply to documents where physical copies have to be filed with stock exchanges on any date after the new regulations came into force? There are no clear answers from either the stock exchanges or the market regulator.

Some companies have claimed that the requirement of electronic disclosure of annual reports would apply to finalisation and distribution of annual reports that are made after the new rules came into existence. A case in point is that of HDFC Bank. An official of the bank said that in their case the AGM was held on May 30, 2002 while the electronic filing came into effect in June. Since all legislations were prospective, they are not required to file the annual report for 2001-02 in electronic format, the official claimed.

If HDFC Bank's argument is to be accepted quite a few others could easily claim the privilege of such exemption. Companies such as HLL, Nestle, Glaxo have closed their accounts as of December 2001 and consequently have had their AGMs held much before the new stipulation came into effect.

SEBI officials who spoke on condition of anonymity said that monitoring of the electronic filing was the responsibility of the stock exchanges and action would have also to be taken by them.

Filing of the information in electronic format was made compulsory by the market regulator by amending the listing norms of the exchange by inserting clause 51 to the Listing Agreement. So technically, a company failing to file its documents in electronic form is in violation of the listing agreement and hence it is the responsibility of the stock exchange.

But officials with the stock exchanges on their part contend that it is difficult for them to find out whether a company had filed the documents in the manner required. They say that the fact that companies have to directly upload these documents onto the SEBI Web site maintained with technical support from National Informatics Centre (NIC) means that they will not be able to identify errant companies in this regard.

Call it non-compliance of the regulatory norms or merely a technical problem as some have contended it is, the Edifar set up with much fanfare in June this year, on the lines of `EDGAR' a creation of the Securities and Exchange Commission of the US, has still some distance to go before it can claim to rank on par with its US counterpart.

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