Listing Rules: Sebi puts in place system to check non-compliance

The Indian Express
May 04, 2018

The Securities and Exchange Board of India (Sebi) on Thursday instituted a stronger mechanism to check non-compliance of listing conditions, giving exchanges the power to freeze promoter shareholding and even delist the shares of such defaulting companies.

The Sebi’s 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 regulator said in a circular.

Apart from this, exchanges can levy fines on non-compliant company, place the stocks of such firms to restricted trading category and suspend trading in the shares of such entities. 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 have to initiate the process of compulsory delisting.

Sebi said the new rules would come into force with effect from compliance periods ending on or after September 30, 2018.

According to the norms, the 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.

As per the new rules, Sebi has directed the 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. 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.

The new norms also mandate that 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 will also 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.

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