New Delhi: Rejecting the idea of assuming a CVC-like role of anti-corruption watchdog for the private sector, capital market regulator SEBI has said it wants listed entities to follow a nine-point disclosure norm against non-ethical business practices instead.

The Securities and Exchange Board of India (SEBI), which regulates thousands of listed companies as well as hundreds of other market entities like brokers, merchant banks and ratings agencies, has informed its board that it cannot adopt a private sector role similar to that of the Central Vigilance Commission (CVC) for government entities.

In a memorandum submitted to its board at its last meeting on November 24, SEBI said a CVC-like role ‘is not within the mandate of SEBI under the existing legal framework’.

At the same board meeting, SEBI approved a new disclosure-based regime for listed companies with respect to non-ethical business practices.

As per the decision, companies would need to submit a 'Business Responsibility Report', along with their annual reports, to help assess the fulfillment of their environmental, social and the corporate governance responsibilities.

These disclosures, which SEBI has proposed to be based on nine key principles of responsible, transparent and ethical business practices, would initially apply to the top 100 companies.

Regarding the adoption of a CVC-like role in respect of activities of private sector companies, SEBI said its jurisdiction extends to listed companies in the private sector on certain matters delegated under the Companies Act.

"Further, SEBI has been established to protect the interest of investors in securities and to promote the development of, and to regulate, the securities market as enshrined in the SEBI Act," the regulator told its board.

The matter came up for discussion in the backdrop of a proposal to SEBI by Transparency International, a global civil society organisation working against corruption, for exploring the possibility of SEBI performing a CVC-like role with respect to the activities of private companies.

The CVC was set up by the government with a mandate to inquire into offences alleged to have been committed under the Prevention of Corruption Act by certain categories of central government employees, corporations established by or under any Central Act, government companies and other entities owned and controlled by the central government.

SEBI said that Transparency International India (TII) was also working toward eradication of corruption by ‘bringing together relevant players from government, civil society, business and the media to promote transparency in elections, in public administration, in procurement and in business.’

In a letter sent to SEBI in July, inviting the regulator to participate in a Conference on Ethics in Business, TII had suggested exploring the possibility of SEBI performing a role similar to the CVC with regard to the activities of private sector firms.

SEBI participated in the conference, held in August. SEBI said the conference was focused on the performance of Integrity Pacts (IP), a tool developed by TII for preventing corruption in public contracting.

An IP is an agreement between a government agency and all the bidders for a public contract and lays down each parties' rights and obligations for prevention of bribery and other corrupt practices.

This tool also introduces a monitoring system with the approval of the CVC that provides for independent oversight and accountability.

SEBI told its board that it was also informed by the TII representatives about their initiatives for extending the principles of business ethics and adoption of IP by corporate in private sector in their business dealings.

SEBI also noted that the "CVC has issued various circulars emphasising the necessity of adopting IP in government organisations in their major procurement activities."

However, in view of the limited procurement activities of public sector banks, insurance companies and financial institutions, these organisations were exempted from the IPs.

Noting that SEBI, being a government organisation, was covered under the said circulars of the CVC, the board was told "... the fact remains that SEBI has only very limited procurement activities."

On the Business Responsibility Report, SEBI told its board that companies were "accountable not merely to their shareholders from a revenue and profitability perspective, but also to the larger society, which is also its stakeholder."

Hence, adoption of responsible business practices in the interest of the social set-up and the environment are as vital as their financial and operational performance.

"This is all the more relevant for listed entities, which,  considering the fact that they have accessed funds from the public, have an element of public interest involved, and are obligated to make exhaustive continuous disclosures on a regular basis," the board was informed.

The nine key principles proposed for the new disclosures include the companies' conduct and governance being based on ethics, transparency and accountability, promotion of the well-being of all employees, respect toward human rights and environmental issues, among others.

They also call for businesses to act responsibly when engaged in influencing public and regulatory policy.