In order to streamline the process, to maintain consistency and to adopt a uniform approach in the matter of:
- Levy of fines for non-compliance of the certain Listing Regulations;
- Suspension of trading of securities; and
- Freezing the holdings of the promoter and promoter group of a non-compliant listed entity.
The Capital Market watchdog (SEBI) vide its circular no. SEBI/HO/CFD/CMD/CIR/P/2018/77 dated May 03, 2018, has issued the new framework empowering stock exchanges to levy heavy fines for Non-compliances of Listing Regulations on listed entities and consequent suspension and revocation of trading, arising due to such non-compliance. The new framework shall come into force with effect from compliance periods ending on or after September 30, 2018.
Fines in case of non-compliance:
The revised circular supersedes the earlier circulars bearing reference numbers CIR/CFD/CMD/12/2015 dated November 30, 2015 and SEBI/HO/CFD/CIR/P/2016/116 dated October 26, 2016. Highlights of the same are as follows:
| PENALTIES FOR NON-COMPLIANCE OF LISTING REGULATIONS | ||
| Non-Compliances | Regulation | Fine payable |
| Non -Compliance with requirement to appoint CS as Compliance officer | 6(1) | Rs.1,000 per day |
| Non -Compliance with requirement to appoint Share transfer agent | 7(1) | Rs.1,000 per day |
| Non- Submission of Shareholders Complaints statement | 13(3)/13(1) | Rs.1,000 per day |
| Non -Compliance with Composition of Board of Directors | 17(1) | Rs.5,000 per day |
| Non -Compliance with Constitution of Audit Committee | 18(1) | Rs.2,000 per day |
| Non -Compliance with Constitution of Nomination & Remuneration Committee | 19(1)/19(2) | Rs.2,000 per day |
| Non -Compliance with Constitution of Stakeholder Relationship Committee | 20(2) | Rs.2,000 per day |
| Non -Compliance with Constitution of Risk Management Committee. | 21(2) | Rs.2,000 per day |
| Non-Submission of CG Report. | 27(2) | Rs.2,000 per day |
| Delay in furnishing Prior intimation of Board Meeting | 29(2)/29(3) | Rs.10,000 per instance of non-compliance per item |
| Non-Submission of Shareholding Pattern | 31 | Rs.2,000 per day |
| Non-Submission of Deviation In utilization of Issue Proceeds | 32(1) | Rs.1,000 per day |
| Non-Submission of Financial Results | 33 | Rs.5,000 per day |
| Non-Submission of Annual Report | 34 | Rs.2,000 per day |
| Non-Submission of information w.r.t. loss of share certificates. And issue of duplicate share certificates. | 39(3) | Rs.2,000 per day |
| Delay in disclosure of record date/dividend declaration | 42 (2) /42(3) /42(4) /42(5) | Rs.10,000 per instance of non-compliance per item |
| Non-Submission of voting results | 44(3) | Rs.10,000 per instance of non-compliance |
| Non-Compliance with norms pertaining to functional website | 46 | Advisory/warning Per instance /Rs.10,000 for every additional instance. |
Note:
- Obligation to Stock exchanges to display non compliances:
Stock Exchanges are obligated to display on their website non compliances by the entity along with action taken against them.
- Fine/penalty on Continual Basis:
The fine shall continue to accrue till the time of rectification to the satisfaction of Exchanges or till the Scrip is suspended
- Mandatory Review of the compliance status by exchanges:
Stock exchanges shall review the compliances status within 15 Days and shall issue notice to the listed entity regarding such non compliances along with notice to other stock exchanges where the entity is listed.
- Entity fails to comply with the notice issued by exchanges: Freezing of Securities of Promoters
In the event company fails to comply with the direction issued by stock exchanges with in stipulated time, Stock Exchanges will intimate the Depositories to freeze the entire shareholding of Promoter & Promoter Group as well as other securities held by promoter/promoter Group in other entity.
- Removal of Freeze:
Direction for Removal of freeze on securities held by Promoter and Promoter Group will be issued only after one month from the date of compliance or date of payment of fine/penalty.
- Non-Payment of Fine:
Failure to pay fine may also initiate appropriate enforcement action
- Comments of the Board of Directors :
Such Non-compliances shall also be required to be placed before the Board of Directors of the Company and the Comments received by the Board shall be inform to Stock Exchanges
Suspension of Trading:
On the first violation of the below mentioned regulations, the Scrip of the company will be moved “Z” Category (7 days advance Notice will be given to Company), wherein the securities are available and traded only “trade to trade” basis. Further on the second consecutive instance violation, the trading in the shares will be suspended in the manner mentioned bellow:
| Non Compliance | Regulation | Suspension |
| Failure to comply with respect to board Composition including appointment of woman director | 17(1) | for two consecutive quarters |
| Constitution of audit committee | 18(1) | for two consecutive quarters |
| Submission of corporate governance compliance report | 27(2) | for two consecutive quarters |
| Submission of shareholding pattern | 31 | for two consecutive quarters |
| Submission of financial results | 33 | for two consecutive quarters |
| Submission of Annual Report | 34 | for two consecutive financial ears |
| Reconciliation of shares and capital audit report | Regulation 55A of the SEBI (Depositories and Participants)Regulations, 1996 | for two consecutive quarters |
| Receipt of the notice of suspension of trading of that entity by any other recognized stock exchange on any or all of the above grounds. | ||
If the trading in the shares of the Company is suspended as mentioned above, it has to comply with the prescribed procedure for revocation of suspension.
Further, if suspension continues or the company fails to pay fine within Six Months from the date of suspension, the stock exchange shall initiate the process of Compulsory Delisting.
Procedure for Suspension:
- On the Second subsequent event of violation, the Stock exchanges will give notice to the non-compliant Company for complying with the said violation within 21 days of Intimation.
- If the Non-Compliant entity complies with the requirement and paid the penalty before the two days of date of suspension as mentioned in the notice, the trading will not be suspended & Any Security held by of Promoter and Promoter Group will be de-freezed after one month from the date of Compliance.
- In case of failure to comply with respective requirement(s) and/or pay fine within stipulated period, the trading in shares of the Company will be suspended and all the securities held by promoter & promoter group shall remain frozen during the period of suspension.
- Once the company is suspended the trading will be re-opened after 15 days of suspension, and securities will be in traded in trade to trade basis only, further the said trading will be permitted only on first day of every week till 6 months
Revocation of Suspension:
If the Non-Compliant Suspended Company complies with the requirement and pays the fine, the Stock Exchange on the date of Compliance shall revoke the suspension and give the public notice regarding the same. After 7 days of notice the suspension will be revoked and trading will be done in trade to trade basis till 7 days from the date of revocation and thereafter will be shift to normal category.