SEBI Comes Out With New Framework To Check Non-Compliance Of Listing Rules
The Securities and Exchange Board of India on Wednesday put in place a stricter mechanism to deal with non-compliance of listing conditions under which stock exchanges will have powers to slap penalties up to Rs 50,000 for certain violations.
At present, a stock exchange is allowed to charge a maximum amount of Rs 10,000 for each violation of listing norms that need to be complied with by companies.
According to a SEBI circular, exchanges can impose a fine of Rs 50,000 per instance for non-compliance with respect to obtaining in-principle approval of bourses before issuance of securities.
The bourses can levy a fine of Rs 25,000 each in cases of non-disclosure of dividend distribution policy in annual reports and on the websites of the entities.
The amount would also be applicable in the cases of non-convening of annual general meeting within a period of five months from the close of a financial year and for not taking exchange's approval before filing request for change of name with Registrar of Companies.
The new framework would come into force with effect from compliance periods ending on or after March 31, 2020.
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.
Besides, the exchanges can impose a penalty of Rs 10,000 for delay in furnishing prior intimation about the company's board meeting as well as delay in non-disclosure of record date or dividend declaration, and non-compliance with norms pertaining to having a functional website.
Failure to appoint women directors on the boards, non-compliance with requirements pertaining to appointment or continuation of non-executive director who has attained the age of 75 years and failure to ensure adequate steps for expeditious redressal of investor complaints would attract fines ranging from Rs 1,000-5,000 per day.
Such fines would continue to accrue till the time of rectification of the non-compliance or till the scrip of the listed entity is suspended from trading. These accruals would be irrespective of any other disciplinary or enforcement action initiated by stock exchanges or SEBI.
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Apart from fines, bourses can move the stocks of non-compliant 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 would have to initiate the process of compulsory delisting, as per the circular.
Further, if a non-compliant entity is listed on more than one exchanges, the bourses concerned need to take uniform action in consultation with each other.
The exchanges should disclose on their websites the action taken against the listed entities for non-compliance, including amount of fine levied, details about freezing of shares of promoters and the period of suspension.
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. If any non-compliant listed entity fails to pay the fine despite receipt of the notice, the exchange concerned would initiate appropriate enforcement action, including prosecution.