Markets regulator SEBI is planning to give exchanges the power to freeze promoter shareholdings and even delist shares of defaulting companies that failed to comply with the regulator’s listing conditions.
The plan will be discussed at the board meeting of the Securities and Exchange Board of India this week, senior officials said. It has been further proposed that if non-compliance persists, it would lead to suspension, revocation of trading and delisting of the shares of such listed entities, the officials added.
The framework aims to put in place a system that makes regulatory compliance more effective.
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.
The firms may be suspended for six months and subsequently, the process of compulsory delisting would be initiated. SEBI may also ask stock exchanges to impose penalties ranging from Rs 1,000-5,000 per day on violation of certain clauses of the listing agreement.
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. “Fines would accrue only till the date trading is suspended,” the officials said.
If a non-complaint entity is listed on more than one exchanges, the bourses may take uniform action in consultation with each other. The board of directors should be informed about the non-compliance and their comments should be made public so that investors can make informed decisions.
The exchanges should disclose on their websites the action taken against the listed entities for non-compliance of the listing conditions, including the details of respective requirement, amount of fine, period of suspension, freezing of shares, among others.
Every bourse may be required to review the compliance status of the listed entities within 15 days from the date of receipt of information. Also, exchanges should 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 may initiate appropriate enforcement action including prosecution.
If it complies with the SEBI’s norms and pays the fine within three months, its suspension may be revoked. Trading will only be allowed on a “trade-to-trade” basis for a week from revocation.