Step-by-step guide for disclosure for Analysts/Investors Meet

Do’s and don’ts to be ensured by listed companies

Brief Background

In order to disseminate information regarding performance of the company, its future prospects etc. listed companies usually conduct gatherings of analysts/investors after dissemination of quarterly results or atleast once in a year. Such meets generally include conference calls or meeting with group of investors or one-to-one meet or calls with investors or analysts, including those in the nature of walk-in. The idea behind conducting such meets is to provide transparency for the company’s performance figures, to address the queries of the analysts/investors and to ensure that the company’s information is available to the stakeholders. However, the risk of information asymmetry in such meets or gatherings is very inherent.

While the Regulatory Framework of SEBI i.e. SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 (‘Listing Regulations’) provided for disclosure of adequate and timely information to enable investors to track the performance of a listed entity including the information pertaining to occurrence of investors meet/conference call with analysts, however, several inconsistencies were observed in the disclosures made by the listed entities. For instance, several entities were not divulging the details of what transpired in such investors’ meetings and were merely disclosing the limited presentations w.r.t. the meetings. As such, minority shareholders, who did not attend these meetings, were not privy to the information shared with a select group of investors, thereby creating information asymmetry among different classes of shareholders.

Realizing this, SEBI, on November 20, 2020, came up with the consultation paper[1] and recommended enhanced disclosure requirements w.r.t. post earning calls and one-to-one meets. Our write-up analyzing the said consultation paper can be viewed here.

Later, vide notification dated May 05, 2021, SEBI enhanced the disclosure requirements w.r.t. Investors’/ Analysts’ meet.

In this article, the author has made an attempt to discuss the changes made in the disclosure requirements w.r.t. analyst meet step by step.

Post amendment in Listing Regulations

On May 05, 2021, SEBI amended the Listing Regulations which inter alia, covered analyst meet. Pursuant to the said amendment, the companies are required to include enhanced disclosure requirements with respect to analyst/ investors meets so as to avoid selective disclosure and information asymmetry and to ensure market integrity and to safeguard the interest of investors. The said amendments are voluntary for FY 2021-22, and will become mandatory from FY 2022-23.

The synopsis of the amendment is provided below:

Regulatory requirements in case of one-to-one meet

In respect of one-to-one meet, there are no legal restrictions as such. However, considering the intent of the Listing Regulations and SEBI (Prohibition of Insider Trading) Regulations, 2015 (‘PIT Regulations’), the following things are explicitly clear:

  1. One-to-one meets even though unregulated, should be discouraged looking at the high possibility of leakage of UPSI; and
  2. Even if the entity has one-to-one meet, it cannot share any UPSI.

Whether sharing of UPSI is allowed in a group meet or one-to-one meet?

The PIT Regulations prohibit sharing of UPSI in any manner to any person including analysts/ investors and require the listed entities to take all required steps to ensure the same. Considering the same, the facts whether it is a group meet/ call or otherwise or whether such meet/ call was organized by the listed entity itself or not, become irrelevant and the prohibition shall apply in all cases.

Therefore, there is a remote chance of sharing such UPSI until and unless the same is as per the provisions of code of fair disclosure framed by the listed entity. Accordingly, if any UPSI is shared, legitimately in terms of the said code, the entity will have to disclose the audio/ video recordings or the transcripts of such meeting to the stock exchange promptly.

Guidance Note of Analyst/ Institutional investors’ meet

The amendment in the Listing Regulations came up with various interpretations and ambiguities w.r.t. disclosure requirements. We have discussed such anomaly in our previous article which can be viewed here.

In order to clear the ambiguities w.r.t the disclosure requirements, NSE, vide circular dated 29th June, 2021[2], has provided further clarifications. While the intention of the stock exchange was to provide clarity, in reality, it further complicated the issue. In this article, we have tried to provide the step-by-step guide for disclosure on analyst meets and post earning calls. Further, we have also provided the do’s and don’ts to be ensured by the companies.

Disclosure requirements w.r.t. Analyst meets

In order to comply with the provisions of Listing Regulations in letter and spirit, the listed companies are required to ensure that it makes timely disclosure to stock exchanges and on their own website. The compliance requirement as per the amended provisions w.r.t. analysts/ investors meet are jotted down below:

Sr. No. Cases Disclose what? By When? Other Points to be ensured
1. Post earning calls/ Quarterly calls, by whatever name called (after disclosure of quarterly financial results) Schedule of such meeting As soon as the same is fixed but not later than 24 hours. ·         Mandatory only for group meets.
Presentation and the audio/ video recordings of such meeting Before the next trading day or within 24 hours from the conclusion of the meet, whichever is earlier. ·         Mandatory for both group meets and one to one meets.

·         To be disclosed whether conducted by listed entity or any other entity.

·         To be hosted on the website of the company for minimum 5 years and thereafter as per the archival policy of the company.

·         To be disclosed simultaneously to the stock exchange.

Transcripts of such meeting Within 5 working days of conclusion of the meet. ·         Mandatory for both group meets and one-to-one meets.

·         To be disclosed whether conducted by listed entity or any other entity.

·         To be hosted on the website of the company and preserved permanently.

·         To be disclosed simultaneously to the stock exchange.

2. Other Analysts/ Investors meets Schedule of such meeting As soon as the same is fixed but not later than 24 hours. ·         Mandatory only for group meets.
Presentation made in such meeting As soon as the same is concluded but not later than 24 hours. ·         Mandatory only for group meets.

·         To be disclosed on the website of the company, whether conducted by listed entity or any other entity

·         To be disclosed simultaneously to the stock exchange.

3. In case any UPSI is shared for legitimate purpose as per the Code of Fair Disclosure Audio/video recordings or transcripts of such meeting Promptly ·         Applicable to both group as well as one-to-one meets.

·         To be disclosed on the website of the company, whether conducted by listed entity or any other entity.

·         To be disclosed simultaneously to the stock exchange.

 

Do’s and Don’ts to be ensured by the listed entities

The listed entities will be required to observe some crucial points while scheduling or attending analysts’/ investors’ meet, conference calls, post earning calls etc.  Briefly, the following are the do’s and don’ts:

Do’s Don’ts
Always conduct scheduled meets. Avoid unscheduled meets.
Always schedule group meets. Avoid scheduling one-to-one meet.
Upload the schedule of group meets/ calls on the website promptly but not later than 24 hours from fixing the same and also simultaneously submit the same with SE. Do not forget to upload and send the schedule on the website and to the stock exchanges, respectively beyond the prescribed time.
Upload the presentation made to analysts/ investors in the scheduled group meet the website promptly but not later than 24 hours from fixing the same and also simultaneously submit the same with SE. Do not forget to upload and send the schedule on the website and to SE, respectively beyond the prescribed time.
Ensure to make audio and video recording of the post earnings/ quarterly calls, whether conducted physically or through digital means, either conducted by listed entity or any other entity including one- to- one meets. Do not avoid making audio/video recording of such calls irrespective the same was conducted by the listed entity itself or by any other entity.
Ensure transcripts of the post earnings/quarterly calls, whether conducted physically or through digital means, either conducted by listed entity or any other entity including one- to- one meets. Do not avoid making transcripts of the proceedings of such calls irrespective the same was conducted by the listed entity itself or by any other entity.
Ensure that the information shared with the investors is already available in public domain. Do not share UPSI with the investors.
Maintain silence period, if any, as provided in the code of fair disclosure framed by the entity. Discourage any sort of meets either group meet or one-to-one meets (including walk-in investors) during silence period.
Upload all audio/video recordings and presentation of the post earning/ quarterly calls on the website of the Company within 24 hours of conclusion of such calls or next trading day, whichever is earlier. Avoid uploading audio/video recording beyond the prescribe time.
Upload all transcripts of the post earning/ quarterly calls on the website of the Company within 5 working days of conclusion of such calls. Avoid uploading transcripts of the post earning/ quarterly calls on the website of the company after 5 working days of conclusion of calls.
Simultaneous to uploading audio/video recording and transcripts on the website of the company, submit the same to the recognized stock exchange Do not forget to send audio/video recording and transcripts of the meets to the recognized stock exchange
Preserve the disclosures made on the website of the Company

(a)    Audio/video recording- for minimum 5 years and thereafter as per archival policy of the company;

(b)   Transcripts: permanently

Do not avoid preserving of audio/video recording and transcripts of the meets

Conclusion

The amendment in Listing regulations and guidance note by the stock exchanges give us the clear view that the companies are required to make timely disclosure of audio/ video recordings, transcripts of post earning calls and only presentations of analyst meet to the stock exchange. Even though this seems to be the compliance burden on part of the listed companies which are already pressed with various disclosure requirements, this step is surely a welcome move as it will help the watchdog of capital markets to curb insider trading and information asymmetry.

[1] https://www.sebi.gov.in/web/?file=https://www.sebi.gov.in/sebi_data/attachdocs/nov-2020/1605853267317.pdf#page=1&zoom=page-width,-16,792

[2] https://www.bseindia.com/markets/MarketInfo/DispNewNoticesCirculars.aspx?page=20210629-44

Our other article on similar topics can be read here – http://vinodkothari.com/2020/11/sebi-proposes-enhanced-disclosures-for-meetings-with-analyst-investors-etc/

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