Proxy Advisers (PAs) are required to share their reports with clients and companies at the same time. This ensures transparency and fairness. This article provides a comprehensive technical analysis of the report sharing requirements.
Regulatory Basis
Procedural Guidelines
The procedural guidelines for proxy advisers specify:
"Proxy Advisors shall share their report with its clients and the company at the same time. This sharing policy should be disclosed by proxy advisors on their website. Timeline to receive comments from company may be defined by proxy advisors and all comments/clarifications received from the company, within timeline, shall be included as an addendum to the report. If the company has a different viewpoint on the recommendations stated in the report of the proxy advisors, then proxy advisors, after taking into account the said viewpoint, may either revise the recommendation in the addendum report or issue an addendum to the report with its remarks, as considered appropriate."
The Simultaneous Disclosure Requirement
What is Required
PAs must share their report with:
- Clients
- The company (subject company)
At the same time.
Why Simultaneous
- Ensures fairness
- Prevents selective disclosure
- Enables transparency
- Gives both parties equal access
Sharing Policy Disclosure
What to Disclose
PAs must disclose their sharing policy on their website.
What to Include:
- Timing of sharing
- Method of sharing
- Timeline for comments
- Addendum process
Sample Sharing Policy
"Report Sharing Policy:
1. We share our reports with clients and the subject company at the same time.
2. Reports are shared via email and our client portal.
3. Companies are given [X] days to provide comments or clarifications.
4. All comments received within the timeline are included as an addendum to the report.
5. If the company has a different viewpoint, we may revise the recommendation or issue an addendum with our remarks."
Comment Process
Step 1: Report Sharing
Share the report with clients and the company at the same time.
Step 2: Comment Period
The company has a defined timeline to provide comments.
Step 3: Review Comments
PAs review the comments.
Step 4: Addendum
All comments received within the timeline are included as an addendum.
Step 5: Final Report
The final report includes the addendum.
Viewpoint Difference Process
Scenario
The company has a different viewpoint on the recommendation.
PA Response
After taking into account the viewpoint, the PA may:
- Revise the recommendation in the addendum report, or
- Issue an addendum to the report with its remarks.
Practical Implementation
Timing
- Share reports simultaneously
- Define a clear timeline for comments
Method
- Client portal
- Website
Documentation
- Document all communications
- Maintain records of comments
Common Compliance Gaps
1. Not Sharing Simultaneously
Some PAs do not share reports simultaneously.
Solution: Share reports with clients and companies at the same time.
2. Not Disclosing Sharing Policy
Some PAs do not disclose their sharing policy.
Solution: Disclose the sharing policy on the website.
3. Not Including Comments as Addendum
Some PAs do not include comments as an addendum.
Solution: Include all comments within the timeline.
4. Not Responding to Viewpoints
Some PAs do not respond to company viewpoints.
Solution: Respond to viewpoints and revise or issue remarks.
Consequences of Non-Compliance
1. Regulatory Action
SEBI may take action for non-compliance.
2. Lack of Transparency
Non-simultaneous sharing reduces transparency.
3. Reputational Damage
Non-compliance can damage the PA's reputation.
Conclusion and How Anuj Desai & Associates Can Help
Simultaneous report sharing is a critical compliance requirement for PAs.
Anuj Desai & Associates offers specialized services to help PAs comply with report sharing requirements:
- Development of sharing policies
- Implementation of simultaneous sharing
- Addendum management
- Compliance audit and advisory
Contact us today to ensure your report sharing practices comply with SEBI requirements. Our team will guide you through the process.
Disclaimer: This article is for informational purposes only and does not constitute legal advice. Readers are advised to consult qualified professionals for legal and compliance matters. Anuj Desai & Associates is a SEBI compliance consulting firm based in India.