Mumbai, Sept. 30: Promoters who blatantly flout listing conditions on bourses will now face a graduated scale of penalties and procedural action before the stock of the errant company is finally suspended from trading.
Until now, the standard practice was to suspend the stock of the company that wilfully flouted listing conditions by failing to submit shareholding pattern, financial results, annual reports and other corporate governance reports.
However, Sebi has now realised that the suspension of the stock from trading hurts investors more than promoters since it denies them an easy exit route from a mismanaged company. So, the regulator has devised a new standard operating procedure to deal with errant promoters before they suspend the stock.
Sebi has now advised exchanges to adopt other measures, which will include the imposition of fines, freezing of shares of the promoter and promoter group, and transferring the stock to the Z category where trades have to be settled on a trade for trade basis. Buyers in the Z category stocks have to take delivery of the shares and cannot square up transactions.
“It has been decided that recognised stock exchanges shall use imposition of fines as action of first resort in case of such non-compliances and invoke suspension of trading in case of subsequent and consecutive defaults,” Sebi said in a circular issued today.
It directed the exchanges to disclose on its website the actions taken against the listed entities for non-compliance of the listing conditions.