Why materiality in listing norms requires clarity

livemint.com:

₹10,000 for non-availability of a dustbin outside its store. While disclosures are important and it is also understandable that penal action taken by regulatory authorities need to be taken seriously, the non-application of materiality threshold here could lead to a deluge of disclosures where events that do not have a material impact may also get reported under the clause together with those which are actually material in the name of technical compliance.

Stakeholders may get lost in a sea of data and even the regulator may end up in a data-rich, information-poor situation. Sebi may consider specifying the legislations (classified under corporate laws including Companies Act, Sebi regulations and Fema; direct and indirect tax laws, prevailing sectoral laws applicable to the specific listed entities) under which any adverse action taken may be seen as early warning signals of lower levels of governance and hence, which should be reported without application of materiality, and by specifying that action taken under other legislations may be subject to application of materiality thresholds.

For business to be sustainable, strategy and governance should be balanced and go hand-in-hand. There is no doubt about the need for business strategies to conform to the laid down governance parameters.

From a materiality perspective, not all instances of non-compliances should be perceived as governance issues. Sebi is entrusted with the task of prescribing the compliance framework through regulations such that there is a fine balance between strategy and governance.