Sebi to ask depositories to act against entities failing to update share database

Markets regulator Sebi Thursday directed depositories to freeze securities of promoters and directors of listed companies that failed to ensure updation of database with distinctive number of equity shares.

Besides, the corporate benefits accrued to beneficiary accounts of promoters and directors of such companies shall also be freezed, Sebi said.

The directions shall come into effect from August 1, it said in a circular.

In June 2015, the regulator had asked depositories to maintain a database of all shares including those in physical and demat formats with distinctive numbers (DN) for equity shares of all listed companies.

In case of mismatch in the DN information with the data provided by the stock exchanges in the database, the issuer and registrar and transfer agent (RTA) were asked to take steps to match the records and update the same latest by December 31, 2015.

While asking the issuers/RTAs to ensure reconciliation of the records, Sebi added that failure to do so would attract appropriate actions.

However, certain companies are yet to comply with June 2015 circular despite follow-ups by depositories, Sebi said.

Consequently, Sebi has directed depositories to "freeze all the securities held by the promoters and directors of the listed companies that are not in compliance with the provisions of Sebi circular...dated June 5, 2015".

Besides, the depositories "shall not effect any transfer, by way of sale, pledge, etc, of any of the securities, held by the promoters and directors of such non-compliant companies", Sebi added.

The freeze on accounts shall be retained till the time the company complies with requirements of reconciliation of shares.

Providing an exception, Sebi said "depositories are advised to keep in abeyance the action mentioned above in specific cases where moratorium on enforcement proceedings has been provided for under any act, court/tribunal orders, etc".