Capital market regulator Securities and Exchange Board of India is exploring options to make it mandatory for promoters to disclose if they have raised any money by pledging shares they hold in the company.

Sources said though no decision has been taken in this regard so far, the issue has been discussed at higher levels. The market regulator would take a decision on how to make such a disclosure mandatory for promoters after considering all aspects based on expert opinions, they said.

• The Satyam fiasco: Complete coverage

In the last few months, there have been instances where financiers have sold promoters' shares pledged with them after stop losses were triggered. It happened in case of Orchid Chemicals recently. But the issue became serious when Satyam [Get Quote] Computers' promoters shares were sold by financiers. In fact, the revelations by Satyam's founder-chairman B Ramalinga Raju that the IT firm's books were fudged came after most of his holdings were disposed of in the market.

Promoters raising money by pledging shares is not a new trend. Generally, promoters raise cash by this route for investing in new ventures or increasing their holdings in the company or in another group company. In a rising market things move on, but the problem arises in a falling market when promoters fail to make margin payment.

Those who know the business say that many non-banking finance companies and some banks are very active in such finances. Pledged shares are kept with some trusts (it was IL&FS Trust in case of Satyam Computers). If margin calls trigger or prices fall below a certain level, trusts inform financiers who, in turn, sell the shares if promoters don't pay.

In many cases, promoters pay further margins by pledging more shares, but that was not possible in Satyam's case as Raju and his family members were not left with much shares. Before giving the 'sell' order, financiers need the permission of the trust with which the shares are kept.

"Sebi should ask promoters to disclose if they have raised finances against their holdings," said Vibhav Kapoor, group chief investment officer of IL&FS. This would improve transparency in the market, he added.

However, marketmen say that any such information may result in widespread selling in that counter as promoters' raising finances through pledging of shares is considered as a risk factor.

According to a conservative estimate, there may be at least 100 to 150 companies whose promoters may have pledged shares to raise money as most other sources of funds have dried up in recent times.