Disclosure and Transparency
What the exam tests
Disclosure questions test the principles of timely, accurate, complete and non-selective disclosure, the LODR event-based regime, financial reporting timelines and insider-trading controls. You must decide whether information is material and when it must reach the market.
Core rules and concepts
- Purposes: informed investment decisions, price discovery, accountability and reduced information asymmetry.
- Principles: disclosures should be timely, accurate, complete, comparable, consistent and material; selective disclosure to analysts or media is prohibited. Materiality is qualitative as well as quantitative.
- Companies Act: s.129 financial statements; s.134 Board's report; s.92 annual return; s.135 CSR disclosures; s.197 managerial remuneration; s.204 secretarial audit report.
- LODR Regulation 30: disclose material events or information as specified in Schedule III within 24 hours, with updates and clarifications. Regulation 33: quarterly and annual financial results within 45 and 60 days respectively. Regulation 34: annual report. Regulation 36: website disclosures. Regulation 27(2): compliance certificate.
- Insider trading: SEBI PIT Regulations 2015 prohibit dealing on UPSI; companies must maintain a structured digital database, close trading windows, pre-clear designated persons and disclose holdings.
- Board materiality policy: a documented policy guides event classification, but it cannot be used to suppress a material event.
- Integrated reporting and BRSR: top listed companies must report business responsibility and sustainability information.
Worked example
A listed company suffers a cyberattack that exposes customer data and disrupts billing for several days. The board's materiality policy lists data breaches as potentially material. The company should assess impact, make a Regulation 30 disclosure within 24 hours of the event or of becoming aware, update the market on remediation, and treat the information as UPSI until disclosed. Waiting for the quarterly results would breach timeliness. Reasoning: the test is whether the event is material to investors, not whether the financial effect is already quantified.
Traps that cost marks
- Treating Regulation 30 as a voluntary or annual-report obligation.
- Using a high quantitative threshold to avoid disclosing a qualitatively material event.
- Selective briefing of analysts before exchange disclosure.
- Forgetting trading-window and SDD requirements around UPSI.