Listing norm breach may lead to freezing of promoter holding

Sebi lays onus on exchanges and depositories for compliance, through penalties and suspension

The Securities and Exchange Board of India (Sebi) on Monday warned of specific consequences if entities are found to be breaching the listing regulations on an exchange. One of these is the freezing of promoter and promoter group holding in such an entity.

Starting Tuesday, as a result of Monday's instructions, listing agreements between entities and exchanges become redundant. All such contractual agreements will be replaced by the new Sebi regulations. As a first call of action, exchanges would impose penalties on companies not complying with Sebi regulations.

“Recognised stock exchanges shall use imposition of fines as action of first resort in case of such non-compliance and invoke suspension of trading in case of subsequent and consecutive defaults,” the Sebi circular stated. The exchanges have been advised to have a definite structure on fines and procedures for suspension of trades and their revocation. If a company has defaulted two or more times in succession, exchanges would place the scrip in a separate, ‘Z’,category. Here, trades shall be on a 'trade for trade' basis only.

To ensure a smooth transition, Sebi has issued a set of circulars on reporting of different aspects under the present listing regulations, such as minimum public shareholding, format of issue of financial results and scheme of arrangement.