Sebi Mulls Introduction Of Securities Audit

The regulator has received a paper from the Institute of Company Secretaries of India (ICSI) elucidating the need for such an audit to ensure proper compliance with provisions relating to transfer of securities.

Though the idea of a securities audit has been floated at some informal meetings within Sebi, it is not very clear how it will practically happen and whether there will be physical checking of the fact that all the norms have been complied with, Sebi senior executive director, O P Gahrotra, said.

With the introduction of a depository, the investors of the companies not opting for the depository system would be better serviced and may be the incidence of securities related violations would come down, he added. Gahrotra said the need for a securities audit should be viewed in the context of the setting of the depository which would considerably reduce paper work.

On an average, each fortnight Sebi receives complaints against over 1000 companies for either delayed share transfer or despatch of bonus shares, refund orders or dividends. The complaints take a long time to get resolved, with many going unresolved for about two to three years. There is no mechanism to put a check on this before the damage is done.

The pape said for each activity related to share transfer, sending of dividend or interest warrants, refund orders, splitting or sub-division of shares, a definite time frame has been laid down along with other rules, but there is no machinery which makes sure these norms are fully complied with.