SEBI proposes stricter penalties against this type of listed companies
What's the story
The Securities and Exchange Board of India (SEBI) has proposed stricter measures against listed companies that obstruct the monitoring of funds raised through public issues. The proposed penalties include fines and even freezing of promoters' demat accounts. The move is part of a review process under the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015. Public comments on these proposals are invited until November 3.
Penalty details
Proposed penalties for non-cooperation
SEBI has suggested that stock exchanges impose a ₹50,000 fine for each instance of non-cooperation reported by a monitoring agency in a reporting quarter or half-year.
Under the proposed enforcement process, stock exchanges would check compliance and issue notices to defaulting companies within 30 days of the due date for submitting the monitoring agency report.
If no action is taken within 15 days, further steps against promoters could be initiated.
Severe measures
Freezing of promoters' demat accounts
If non-cooperation continues even after promoters are notified, stock exchanges could ask depositories to freeze the promoters' demat accounts.
This would be done as per the existing standard operating procedure.
SEBI has also proposed that companies should not be allowed to terminate their agreement with an existing monitoring agency or appoint a new one, until they have rectified the non-cooperation status and enabled the agency to submit a complete report for the relevant period.
Reporting protocol
Direct reporting to stock exchanges
Under the proposed framework, monitoring agencies would be allowed to report non-cooperation directly to stock exchanges.
Such reports would carry a statement of non-cooperation and be displayed prominently on exchange websites.
This is aimed at ensuring transparency and drawing investors' attention to information gaps.
The proposals follow recommendations from a working group led by former SEBI executive director V S Sundaresan.