SEVEN DAYS TO DISCLOSE PLEDGED SHARES

The promoters of all listed companies will have to make full disclosure of pledged shares within seven working days. This will also apply to offshore transactions. The guidelines are with retrospective effect. According to a notification issued by the SEBI, the disclosure will apply to all cases where promoters have pledged over 25,000 shares or more than 1 per cent of the equity of their companies. The disclosure will clearly have to say how many shares are encumbered. SEBI had mandated two kinds of disclosures last week - event-based disclosures, which must be made as and when the shares are pledged, and periodic disclosures, which must be made when companies report their quarterly statements to stock exchanges. The only relief for promoters is that they do not need to disclose whether they have pledged shares of the holding company of a listed entity. The recommendation was made because lenders ask promoters to pay additional margins when the value of the shares pledged as collateral falls. Lenders sell these shares in the market if promoters
fail to pay margins - a common trend in a rapidly falling market.