India’s capital markets regulator is planning to attach bank accounts and properties of promoters who repeatedly flout listing and disclosure norms and fail to take corrective steps.
The Securities and Exchange Board of India (Sebi) is looking to toughen its approach towards promoters and companies that violate norms for more than two consecutive quarters and then default on paying penalties, according to two people directly familiar with the discussions.
The penalty structure may also be changed to deter publicly traded firms from taking listing regulations casually, the people said, declining to be named.
“The corporate finance department (of Sebi) has made certain proposals to increase the monetary penalties levied on defaulting firms and bring in some norms that will be able to penalize the promoters more than the company,” said one of the two people cited above.
Sebi’s latest proposals come amid widespread violations of listing and disclosure norms. There were a total of 2,498 cases of non-compliance in the year ended 31 March, according to BSE data.
The violations included failure to submit annual reports, shareholding patterns and financial results.
“It is a good idea to put in place a mechanism to attach accounts or assets of the promoters or the directors if the penalty amount is long due and the violation is repetitive in nature,” said Amit Tandon, founder and managing director of proxy advisory firm Institutional Investor Advisory Services India Ltd (IiAS). “Sebi should first categorize different types of violations and specify the ranges of potential penal actions on the promoters.”
The regulator did not respond to an email sent Friday seeking comment.
According to existing Sebi norms, a company can be penalized or suspended from trading if it remains non-compliant with the listing regulations for a prolonged period.
“There have been instances where a company was non-compliant in one or two quarters and compliant in the subsequent quarters during a year,” said the first person cited above, adding that such instances make it difficult for Sebi to judge if the company can be classified as a repeat defaulter.
“There are several companies which do not even pay the required penalties in time. The quantum of penalty may make the promoters feel that such defaults are not so serious in nature,” this person said. “These loopholes have to be plugged.”
One of the options being discussed to deter such defaulters is to freeze the bank accounts and attach the assets of the promoters of companies that are repeatedly violating listing and disclosure norms and have not bothered to pay required penalties on time, said the first person. “We may soon see the amendments with stronger penalty structures and new norms to penalize the promoters directly in such cases.”
In February, Mint reported that under Sebi’s listing regulations, the penalties proposed for most types of violations are just a few thousand rupees; in a few cases, the total penalties add up to a few lakhs.
For instance, if a company fails to appoint a compliance officer or company secretary, the regulator proposed to issue a warning, the Mint report said. If the non-compliance continues for 30 days, a penalty of Rs.1,000 per day will be levied until the violator complies with the clause, it added.
Tougher penalties will act as a strong deterrent, experts said.
“If a company continuously remains non-compliant and does not pay the penalties in time, Sebi can first send a showcause notice and allow a hearing to the promoters or the concerned directors. Subsequently, a legal case can be prepared by Sebi and enforcement action can be initiated,” Tandon said. “If the promoters still do not pay the required penalties, Sebi can very well attach the bank accounts or assets of the promoters or the directors.”
The latest proposed changes will make corporate governance norms for listed firms stricter than those stipulated in the new Companies Act.
Company Secretary GAURAV SHARMA+919990694230 Connect on Watts App with Gaurav Email us [email protected] Official Blog Fema India Experts Connect with our Facebook Page:- Click and Like our Page Subscribe our Email updates like other 21,000 Members, Free/Easy/Comfortableway
The Securities and Exchange Board of India (Sebi) is looking to toughen its approach towards promoters and companies that violate norms for more than two consecutive quarters and then default on paying penalties, according to two people directly familiar with the discussions.
The penalty structure may also be changed to deter publicly traded firms from taking listing regulations casually, the people said, declining to be named.
“The corporate finance department (of Sebi) has made certain proposals to increase the monetary penalties levied on defaulting firms and bring in some norms that will be able to penalize the promoters more than the company,” said one of the two people cited above.
Sebi’s latest proposals come amid widespread violations of listing and disclosure norms. There were a total of 2,498 cases of non-compliance in the year ended 31 March, according to BSE data.
The violations included failure to submit annual reports, shareholding patterns and financial results.
“It is a good idea to put in place a mechanism to attach accounts or assets of the promoters or the directors if the penalty amount is long due and the violation is repetitive in nature,” said Amit Tandon, founder and managing director of proxy advisory firm Institutional Investor Advisory Services India Ltd (IiAS). “Sebi should first categorize different types of violations and specify the ranges of potential penal actions on the promoters.”
The regulator did not respond to an email sent Friday seeking comment.
According to existing Sebi norms, a company can be penalized or suspended from trading if it remains non-compliant with the listing regulations for a prolonged period.
“There have been instances where a company was non-compliant in one or two quarters and compliant in the subsequent quarters during a year,” said the first person cited above, adding that such instances make it difficult for Sebi to judge if the company can be classified as a repeat defaulter.
“There are several companies which do not even pay the required penalties in time. The quantum of penalty may make the promoters feel that such defaults are not so serious in nature,” this person said. “These loopholes have to be plugged.”
One of the options being discussed to deter such defaulters is to freeze the bank accounts and attach the assets of the promoters of companies that are repeatedly violating listing and disclosure norms and have not bothered to pay required penalties on time, said the first person. “We may soon see the amendments with stronger penalty structures and new norms to penalize the promoters directly in such cases.”
In February, Mint reported that under Sebi’s listing regulations, the penalties proposed for most types of violations are just a few thousand rupees; in a few cases, the total penalties add up to a few lakhs.
For instance, if a company fails to appoint a compliance officer or company secretary, the regulator proposed to issue a warning, the Mint report said. If the non-compliance continues for 30 days, a penalty of Rs.1,000 per day will be levied until the violator complies with the clause, it added.
Tougher penalties will act as a strong deterrent, experts said.
“If a company continuously remains non-compliant and does not pay the penalties in time, Sebi can first send a showcause notice and allow a hearing to the promoters or the concerned directors. Subsequently, a legal case can be prepared by Sebi and enforcement action can be initiated,” Tandon said. “If the promoters still do not pay the required penalties, Sebi can very well attach the bank accounts or assets of the promoters or the directors.”
The latest proposed changes will make corporate governance norms for listed firms stricter than those stipulated in the new Companies Act.
Company Secretary GAURAV SHARMA+919990694230 Connect on Watts App with Gaurav Email us [email protected] Official Blog Fema India Experts Connect with our Facebook Page:- Click and Like our Page Subscribe our Email updates like other 21,000 Members, Free/Easy/Comfortableway
