Material Event Disclosure
Material event disclosure obligations under Schedule III of the SEBI LODR Regulations require listed companies to promptly inform stock exchanges of specified corporate developments — with outcome-based events requiring disclosure within 30 minutes of the board meeting ending, and other significant events requiring disclosure within 24 hours of their occurrence.
The rationale for mandatory and prompt material event disclosure was rooted in the equal access principle: all investors in the market should have simultaneous access to price-sensitive information, preventing informed insiders from trading ahead of the public. SEBI's LODR Schedule III, revised significantly through amendments in 2021 and 2023, categorised disclosures into two lists.
Part A of Schedule III covered events that were deemed inherently material and required disclosure without the company applying any materiality threshold. This list included: financial results, dividends, stock splits, buybacks, mergers and acquisitions, appointment or resignation of directors, changes in auditors, Qualified Institutional Placements (QIPs), debenture issuance, court orders affecting the company, and commencement or conclusion of litigation above a specified financial threshold. These disclosures had to be made to the stock exchanges within 30 minutes of the conclusion of the board meeting where the decision was taken.
Part B covered events that required disclosure subject to a materiality threshold, which each company defined in a board-approved policy — typically set at 2% of turnover, 5% of net worth, or Rs 10 crore, whichever was lower. Events in this category included major orders won or lost, regulatory actions, business disruptions, product recalls, and natural disaster impacts on operations. The timeline for Part B disclosures was 24 hours from the occurrence of the event.
Amendments effective from October 2023 expanded the list of mandatory disclosures and reduced the 24-hour window for certain outcomes. SEBI also clarified that the 30-minute clock started from the formal conclusion of the board meeting, not from when the management became aware of the outcome, to prevent gaming of the disclosure timeline.
Exchanges had automated surveillance systems (SEBI's SCORES and exchange alert systems) that monitored unusual price and volume patterns and cross-referenced them against disclosure timelines to identify potential leaks of material information. Companies that showed abnormal price movements prior to board meeting dates were subjected to enhanced scrutiny.
Non-disclosure or late disclosure attracted penalties under SEBI (Prohibition of Insider Trading) Regulations in cases where the non-disclosure enabled or was associated with insider trading, and under LODR enforcement for procedural delays.