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Questions and Answers

What does 'SEBI LODR' generally refer to?

  • State Enterprise Balance Initiative - Legislative Oversight and Directives Report
  • Standardised Evaluation Benchmark Index - Legal Observance and Documentation Registry
  • Stock Exchange Bureau of Investigation - Legal Office and Document Repository
  • Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations (correct)

In the context of regulatory compliance, what does the term 'reporting' primarily involve?

  • Submitting required information to regulatory bodies (correct)
  • Creating marketing materials for investors
  • Auditing financial statements for accuracy
  • Developing internal control systems within an organization

What is a key aspect of regulations and compliance for listed companies?

  • Maximizing profits for shareholders in the short term
  • Avoiding any interaction with regulatory bodies
  • Maintaining secrecy about company activities
  • Ensuring transparency and accountability in operations (correct)

Which entity is primarily responsible for enforcing the SEBI LODR regulations?

<p>The Securities and Exchange Board of India (SEBI) (B)</p> Signup and view all the answers

What is the main purpose of 'Listing Obligations' under SEBI LODR?

<p>To ensure that companies adhere to specific standards and disclosures after being listed on a stock exchange (D)</p> Signup and view all the answers

What does Schedule II Part A (E) primarily cover?

<p>Information on recruitment and remuneration of senior officers (C)</p> Signup and view all the answers

Which regulation involves coordination and reporting to the Board, stock exchanges and depositories?

<p>Regulation 6 (2)(b) (D)</p> Signup and view all the answers

Who is included in the reporting described in Schedule II Part A (E)?

<p>Senior officers just below the board of directors (D)</p> Signup and view all the answers

Why is reporting to stock exchanges and depositories important according to Regulation 6 (2)(b)?

<p>To comply with rules, regulations, and directives (B)</p> Signup and view all the answers

Which of the following roles' appointment is detailed under Schedule II Part A (E)?

<p>Chief Financial Officer (B)</p> Signup and view all the answers

Who should approve the policy for determination of materiality for a listed entity?

<p>The Board of Directors (C)</p> Signup and view all the answers

Where should a listed entity disclose its policy for determination of materiality?

<p>On its website (D)</p> Signup and view all the answers

What is the purpose of a listed entity's policy for determination of materiality?

<p>To help employees identify potential material events (B)</p> Signup and view all the answers

To whom should employees report potential material events, according to the regulation?

<p>Authorized Key Managerial Personnel (C)</p> Signup and view all the answers

What is the ultimate goal of reporting potential material events to the KMP?

<p>To ensure timely disclosures to the stock exchange (B)</p> Signup and view all the answers

According to Schedule II Part E, to whom may the internal auditor report?

<p>Directly to the audit committee (A)</p> Signup and view all the answers

A listed entity's policy for determining materiality must NOT do which of the following?

<p>Dilute any requirement specified under existing regulations. (D)</p> Signup and view all the answers

The policy for determination of materiality is framed based on criteria specified in which regulation?

<p>Regulation 30 (4) (ii) (B)</p> Signup and view all the answers

According to the content, what is the primary role of the internal auditor?

<p>The content does not define the role. (C)</p> Signup and view all the answers

What is the ultimate purpose of the policy for determination of materiality?

<p>To ensure compliance with regulatory requirements for disclosures (B)</p> Signup and view all the answers

According to Regulation 9(4)(iv), which employees are included in the regulations?

<p>Chief Executive Officer and employees up to two levels below (D)</p> Signup and view all the answers

According to Regulation 9(4)(iv), the included employees are part of which of these organizations?

<p>All of the above (D)</p> Signup and view all the answers

Under Regulation 2(c), to whom does the compliance officer report if there is no board of directors?

<p>The head of the organization (B)</p> Signup and view all the answers

What is the meaning of officer 'reporting' according to Regulation 2(c)?

<p>Designated senior officer (A)</p> Signup and view all the answers

According to Regulation 2(c), what is the meaning of compliance officer?

<p>Officer responsible for legal and regulatory compliance (D)</p> Signup and view all the answers

According to Regulation 2(c), what is one of the responsibilities of a compliance officer?

<p>Maintenance of records (A)</p> Signup and view all the answers

According to Regulation 2(c), compliance officer shall be financially?

<p>Literate (C)</p> Signup and view all the answers

According to Regulation 2(c), compliance officer shall be capable of?

<p>Appreciating requirements for legal and regulatory compliance (A)</p> Signup and view all the answers

According to Regulation 2(c), under whose overall supervision the compliance officer works?

<p>Supervision of the board of directors (C)</p> Signup and view all the answers

According to Regulation 2(c), compliance of policies is responsibility of whom?

<p>Compliance officer (B)</p> Signup and view all the answers

What is the primary requirement for a person to be considered 'financially literate' under the regulation?

<p>Ability to read and understand basic financial statements (B)</p> Signup and view all the answers

What should one assume when the same statute uses different words?

<p>The words must have different meanings unless the context suggests otherwise. (A)</p> Signup and view all the answers

When a legislature uses different phrases in different sections, what is generally required?

<p>A different meaning should be assigned to each phrase. (B)</p> Signup and view all the answers

If different words of different import are used in the same statute relating to the same subject matter, what should one presume?

<p>They are not used in the same sense. (D)</p> Signup and view all the answers

In the context of hierarchy, what does 'one level below' typically indicate?

<p>A person occupying a position exactly one level below. (D)</p> Signup and view all the answers

Based on the text, what is the main distinction between the terms 'reporting to' and 'one level below'?

<p>They have different meanings. (B)</p> Signup and view all the answers

What financial statements are specifically mentioned in the text as important for financial literacy?

<p>Balance sheet, profit and loss account, and statement of cash flows (B)</p> Signup and view all the answers

What does the term prima facie generally mean in a legal context?

<p>At first glance (D)</p> Signup and view all the answers

According to regulation 16(d), who is NOT included in 'senior management'?

<p>Board of Directors (C)</p> Signup and view all the answers

According to regulation 16(d), who IS included in 'senior management'?

<p>Functional Heads (A)</p> Signup and view all the answers

If a listed entity does NOT have a regular non-executive chairperson, what proportion of the board of directors must be independent directors?

<p>One-half (B)</p> Signup and view all the answers

If the chairperson of the board is a non-executive director, what proportion of the board should comprise independent directors?

<p>One-third (B)</p> Signup and view all the answers

According to regulation 16(d), 'senior management' includes members of management how many levels below the CEO?

<p>One level (B)</p> Signup and view all the answers

Which of the following positions is explicitly mentioned as part of 'senior management'?

<p>Chief Financial Officer (A)</p> Signup and view all the answers

According to the regulations, which of the following is a criterion for needing at least half of the board to be independent directors?

<p>The chairperson is a promoter of the listed entity (A)</p> Signup and view all the answers

According to regulation 16(d), 'senior management' can be described as:

<p>The core management team, excluding the Board of Directors, and one level below the CEO. (B)</p> Signup and view all the answers

What is the minimum proportion of independent directors required if the non-executive chairperson is related to a person occupying management positions at one level below the board?

<p>One-half (D)</p> Signup and view all the answers

According to the regulations, the term 'senior management' specifically includes which role, regardless of their title?

<p>Functional Heads (B)</p> Signup and view all the answers

Who is responsible for ensuring the composition of independent directors meets the regulatory requirements?

<p>Board of Directors (C)</p> Signup and view all the answers

Regulation 17(b) discusses the composition of the board of directors with reference to:

<p>The number of independent directors (C)</p> Signup and view all the answers

If the chairperson is a promoter, what impact does that have on the composition of the board?

<p>It increases the need for independent directors (D)</p> Signup and view all the answers

According to regulation 16(d), what is the scope of 'senior management'?

<p>Officers and personnel of the listed entity who are members of its core management team, excluding the Board of Directors. (D)</p> Signup and view all the answers

What is the main subject addressed by regulation 17(b)?

<p>The composition of independent directors on the board (C)</p> Signup and view all the answers

Flashcards

SEBI LODR

The Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015.

Schedule II Part A (E)

Deals with the recruitment and remuneration of senior officers.

Regulation 6(2)(b)

Specifies reporting requirements to the Board, stock exchanges, and depositories.

Reporting to authorities

Coordinating and informing to maintain adherence to rules and regulations.

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Information on senior officers

Informs stakeholders on appointments or removals of key personnel.

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Compliance with rules

Ensuring that the company operates in accordance with set rules, regulations, and directives.

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Materiality Policy

A policy created by a listed entity to decide what information is important enough to disclose.

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No Dilution of Requirements

Ensures the materiality policy doesn't weaken any existing disclosure requirements.

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Materiality Policy Assistance

Helps employees spot important events and report them to key personnel.

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Authorized KMP Role

Key Managerial Personnel authorized to determine materiality and make necessary disclosures.

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Purpose of Materiality Policy

A framework that guides what a company deems significant enough to disclose, ensuring transparency for investors.

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Internal Auditor Reporting

The internal auditor of a company can report directly to the audit committee.

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Audit Committee

A group within a company that oversees financial reporting and audit processes.

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SEBI's Role

Ensuring fair practices and protecting investor interests in the securities market.

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LODR Regulations Purpose

Regulations that listed companies must follow to ensure transparency and protect investors.

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Listed Entity

A company that has its shares traded on a stock exchange.

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Financially Literate

Ability to comprehend basic financial statements (balance sheet, profit and loss account, and statement of cash flows).

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Different Words in Statute

When a statute uses different words, they are generally presumed to have different meanings based on context.

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Different Phrases, Different Sections

When different phrases are used in different sections of a statute, they typically imply different meanings, unless the context suggests otherwise.

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Presumption of Different Meanings

The presumption that different words used in the same statute do not have the same meaning.

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One Level Below

Indicates a person occupying a position immediately beneath another in the organizational hierarchy.

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Reporting To

Informing relevant authorities.

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Level (in hierarchy)

The hierarchical position of an individual within an organization.

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Financial Literacy Definition

This regulation explains someone who has the ability to read and understand basic financial statements.

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Senior Management (SEBI LODR)

Officers and personnel who are core management team members, excluding the Board of Directors. It includes those one level below the CEO/MD/WTD/Manager, functional heads, Company Secretary, and CFO.

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Independent Directors (Non-Executive Chair)

If the board chairperson is a non-executive director, at least one-third of the board must be independent directors.

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Independent Directors (No Non-Executive Chair)

If a listed entity lacks a regular non-executive chairperson, at least half of the board of directors must be independent directors.

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Independent Directors (Promoter Chair)

If the non-executive chairperson is a promoter (or related), then at least half of the board must be independent directors.

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Purpose of Independent Directors

Ensuring objectivity in decision-making and preventing conflicts of interest.

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SEBI LODR Regulations

SEBI's regulations to ensure better corporate governance and protect investor interests.

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Core Management Team

The officers and personnel who are members of the core mangement team, excluding board of directors.

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Functional Heads

Head of all functional departments of an organization.

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Company Secretary

Ensures company complies with legal and regulatory requirements.

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Chief Financial Officer (CFO)

Oversees the financial health of the company.

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Non-Executive Director

A director who is not involved in the daily management of the company.

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Independent Director

Director with no material relationship with the company.

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Promoter Definition

Person/entity controlling management and policy decisions.

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Corporate governance

Framework of rules, practices, and processes.

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Chairperson Role

Critical determinant of Board composition.

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Two Levels Below CEO

Individuals in a company's hierarchy who are directly below the CEO, who may have access to unpublished price-sensitive information.

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Compliance Officer

A senior officer responsible for regulatory compliance, reporting to the board of directors or head of the organization.

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Reporting Authority for Compliance Officer

The individual to whom the Compliance Officer reports, ensuring compliance with regulations.

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Preservation of UPSI

Ensuring observation of the rules for the protection of unpublished price sensitive information.

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Regulatory Compliance

Overseeing and enforcing regulations and procedures within an organization.

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Monitoring Trades

Monitoring trading activities to detect potential insider trading or other violations.

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Implementation of Codes

Executing the regulations and guidelines that govern the organization.

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Overall supervision

The complete management by the board of directors who watch and guide an organization.

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Unpublished Price Sensitive Information (UPSI)

Unpublished information that could affect a company's stock price once made public.

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Study Notes

  • Regulations use the words "level" and "reporting" in the context of SEBI LODR (Listing Obligations and Disclosure Requirements) and other regulations.

"Level" in SEBI LODR

  • Regulation 16 (d) defines "senior management" to include officers and personnel in the core management team, excluding the Board of Directors.
  • Senior management also includes members of management one level below the CEO, Managing Director, Whole Time Director or Manager, specifically including functional heads, Company Secretary, and Chief Financial Officer.
  • Regulation 17 (b) states that if the board chairperson is a non-executive director, at least one-third of the board must be independent directors.
  • If the listed entity lacks a regular non-executive chairperson, at least half of the board must consist of independent directors.
  • If the regular non-executive chairperson is a promoter or related to a promoter or person occupying management positions at the board level or one level below, at least half the board must be independent directors.
  • Schedule II Part A (E) requires information on the recruitment and remuneration of senior officers just below the board of directors, including appointment or removal of the CFO and the Company Secretary.

"Reporting" in SEBI LODR

  • Regulation 6 (2)(b) involves coordination with and reporting to the Board, stock exchanges, and depositories regarding compliance with rules, regulations, and directives.
  • Regulation 30 (4) (ii) requires listed entities to have a policy for determining materiality, approved by the board and disclosed on the website; this policy should help employees identify and report potential material events or information.
  • Schedule II Part E concerns reporting by the internal auditor, who may report directly to the audit committee.

"Level" in PIT (Prohibition of Insider Trading) Regulations

  • Regulation 9 (4)(iv) includes the CEO and employees up to two levels below in determining who could have access to unpublished price-sensitive information.

"Reporting" in PIT Regulations

  • Regulation 2 (c) defines a "compliance officer" who reports to the board or head of the organization and is responsible for compliance, record maintenance, monitoring adherence to rules on unpublished price-sensitive information, and implementation of codes.

Interpretation of "Level" and "Reporting"

  • Although the words 'Level' and 'Reporting' are seemingly distinct, the exact meaning depends on context.
  • "Level" indicates a person's hierarchical position.

SEBI's View

  • SEBI's adjudication order in the Chitra Ramkrishna case (February 11, 2022) provides perspective on individuals occupying a position "one level below".
  • Various functional heads reported to Noticee no. 6, making it clear that Noticee no. 6 was at a senior level, just one level below the MD & CEO.

SAT's view

  • SAT hasn't commented on the violation of excessive authority to specific Group operating officer and he being designated as one level below.

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