Disclosure of default: the present SEBI disclosure regulation is adequate

Abstract

There is a much economic sense in achieving rapid disclosure about default. Volume 1 of the report of the Bankruptcy Legislative Reforms Committee (BLRC) articulates a clear strategy for disclosure about default (Section 4.3.5). SEBI and RBI are in the early stages of implementing this. Many people who are used to opacity about default are surprised at the new concept of immediate disclosure of default. We argue that economic logic and the existing SEBI regulations about disclosure (the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015, or "LODR") are consistent with immediate disclosure about default by listed issuers. LODR does not require modification in order to achieve the desired outcome. The lack of disclosure that is presently prevalent reflects an endemic state of violation of the LODR. Executive action by SEBI, to enforce against a few violations, will deliver the required change in the behavior of listed issuers, on disclosure.