INSUBCONTINENT EXCLUSIVE:
Authors: JordanNew Delhi: Sebi has put in place a stronger mechanism to check non-compliance of listing conditions, wherein exchanges will
have powers to freeze promoter shareholding and even delist the shares of such defaulting companies.
The move is aimed at maintaining
consistency and adopting a uniform approach in the matter of levy of fines for non-compliance with certain provisions of the listing
regulations.
Under the new framework, exchanges would have the power to freeze the entire shareholding of the promoter and promoter group in
non-compliant listed entity also holding in other securities, the Securities and Exchange Board of India (Sebi) said in a circular.
Besides,
exchanges can levy fines on non-compliant company, move the stocks of such firms to restricted trading category and suspend trading in the
shares of such entities.
Further, in case an entity fails to comply with the requirements or pay the applicable fine within six months from
the date of suspension, the exchange will need to initiate the process of compulsory delisting.
The new rules would come into force with
effect from compliance periods ending on or after September 30, 2018.
Grounds for suspension from listing include failure to comply with the
board composition including appointment of women director and failure to constitute audit committee for two consecutive quarters; failure to
submit information on the reconciliation of shares and capital audit report for two consecutive quarters.
According to new rules, Sebi has
asked stock exchanges to impose penalties ranging from Rs 1,000-5,000 per day on violation of certain clauses of the listing agreement like
non-submission or delay in submission of document related to the company's financial and shareholding details, failure to appoint women
director on the board.
Besides, the exchanges can levy a fine of Rs 10,000 per instance for delay in furnishing prior intimation about the
company's board meeting and delay in non-disclosure of record date or dividend declaration.
Such fines will continue to accrue till the time
of rectification of the non-compliance to the satisfaction of the concerned recognized stock exchange or till the scrip of the listed entity
is suspended from trading for non-compliance with the provisions of Listing Regulations.
Such accrual will be irrespective of any other
disciplinary or enforcement action initiated by stock exchanges or Sebi.
Further, if a non-complaint entity is listed on more than one
exchanges, the concerned bourses need to take uniform action in consultation with each other.
The board of directors need to be informed
about the non-compliance and their comments need be made public so that investors can make informed decisions.
The exchanges would have to
disclose on their websites the action taken against the listed entities for non-compliance of the listing conditions, including the details
of respective including the details of respective requirement, amount of fine, period of suspension, freezing of shares, among others.
Every
bourse is required to review the compliance status of the listed entities within 15 days from the date of receipt of information
Also, exchanges need to issue notices to the non-compliant listed entities to ensure compliance and pay fine within 15 days from the date of
the notice.
If any non-compliant listed entity fails to pay the fine despite receipt of the notice, the exchange will initiate appropriate
enforcement action including prosecution.
If the non-compliant listed entity complies with the Sebi's requirement and pays applicable fine
within three months from the date of suspension, the exchange will have to revoke the suspension of trading of its shares after seven days
of such compliance and trading would be permitted only in 'trade to trade' basis for a week from revocation.
