Sebi plans to tighten encumbrance disclosure norms

Capital markets regulator Sebi plans to tighten its norms for encumbrance disclosure by promoters of listed firms, amid growing number of cases of shares seeing a free fall due to post-default distress sale of pledged securities by lenders.

The proposed norms would cover disclosure about all direct and indirect pledging of all types of securities and undertakings in their group or associate entities by promoters of listed companies, officials said.

The matter is likely to be discussed by the Sebi board at its meeting later this week.

While the regulator already has a robust set of regulations regarding encumbrance disclosure, concerns have been raised recently with regard to exposure of mutual funds to debt and money market instruments through structured obligations, pledge of shares, non disposal undertakings, related party transactions, corporate or promoter guarantees and other complex structures.

According to a CRISIL report, total value of shares pledged by promoters is more than