Ensure compliance with SEBI’s Standard Operating Procedures (SOP) for non-compliances with Listing Regulations. Freeze/unfreeze shareholdings, suspend trading, or initiate delisting as per the guidelines.
Standard Operating Procedures (SOP) of Securities Exchange Board of India (SEBI) for non-compliances
Introduction:
In order to ensure effective enforcement of the Listing Regulations, the depositories, on receipt of intimation from the concerned recognized stock exchange, shall freeze or unfreeze, as the case may be, the entire shareholding of the promoter(s) in such non-compliant listed entity as well as all other securities held in the demat account of the promoter(s). Further, if a non-compliant entity is listed on more than one recognized stock exchange, the concerned recognized stock exchanges shall take uniform action under this Circular in consultation with each other.
Mechanism:
Pursuant to the amendments to Listing Regulations and to further streamline the Standard Operating Procedure (SOP) for dealing with non-compliances, it has been decided to issue the present Circular in supersession of the said Circular bearing number SEBI/HO/CFD/CMD/CIR/P/2018/77 dated May 3, 2018.Henceforth, the stock exchanges shall, having regard to the interests of investors and the securities market:
a. Take action in case of non-compliances with the Listing Regulations as specified in Annexure I of this Circular, and;
b. Follow the Standard Operating Procedure (“SOP”) for suspension and revocation of suspension of trading of specified securities as specified in Annexure II of this Circular. Stock Exchanges may deviate from the above, if found necessary, only after recording reasons in writing.
ANNEXURE I
ACTION TO BE TAKEN IN CASE OF NON-COMPLIANCES
a. The recognized stock exchanges shall take action for non-compliance with the provisions of the Listing Regulations & circulars/guidelines issued thereunder, by a listed entity.
b. Concerned recognized stock exchange(s) shall display on their website non-compliance by the listed entity and details of fine levied/ action taken.
c. If the non-compliant listed entity subsequently complies with the respective requirement(s) and pays the fine levied, in terms of this circular, the concerned recognized stock exchange(s) shall display on their website details of compliance and fines paid by the listed Simultaneously, the recognized stock exchange(s) shall intimate the depositories to unfreeze the entire shareholding of the promoter(s)in such entity as well as all other securities held in the demat account of the promoter(s), immediately from the date of compliance.8.If any non-compliant listed entity fails to pay the fine despite receipt of the notice as stated above, the recognized stock exchange(s) may also initiate appropriate enforcement action.
d. The recognised stock exchange(s) shall also advise the non-compliant listed entity to ensure that the subject matter of non-compliance which has been identified and indicated by the recognised stock exchange(s) and any subsequent action taken by the recognised stock exchange(s) in this regard shall be placed before the Board of Directors of the company in its next meeting. Comments made by the board shall be duly informed to the recognised stock exchange(s) for dissemination.
ANNEXURE II
STANDARD OPERATING PROCEDURE (SOP)
a. If a listed entity is non-compliant with the provisions of the Listing Regulations as specified under paragraph 2 below, in terms of this circular, the concerned recognized stock exchange(s) shall:
1. Move the scrip of the listed entity to “Z” category wherein trades shall take place on ‘Trade for Trade’ basis by following procedure prescribed at paragraph A below and
2. Suspend trading in the shares of such listed entity by following procedure prescribed at paragraph B below.
b. If the non-compliant listed entity complies with the aforesaid requirement(s) after the date of suspension, the recognized stock exchange(s) shall revoke the suspension of trading of its shares by following the procedure prescribed at paragraph C below.
c. If the non-compliant listed entity fails to comply with the aforesaid requirement(s) within 6 months from the date of suspension, the recognized stock exchange(s) shall initiate the process of compulsory delisting of the non-compliant listed entity in accordance with the provisions of the Securities Contracts (Regulation) Act, 1956, the Securities Contracts (Regulation) Rules, 1957 and the Securities and Exchange Board of India ((Delisting of Equity Shares) Regulations, 2009 as amended from time to time.
A. Standard operating procedure for moving the scrip to “Z” Category
If a listed entity defaults in complying with the provisions of the Listing Regulations as specified under paragraph 2 above, in terms of this circular, the concerned recognised stock exchange(s) shall, in addition to imposing fine under paragraph 1 in Annexure I of this circular, move the scrip of the listed entity to “Z” category wherein trades shall take place on ‘Trade for Trade’ basis. However, before moving the scrip to “Z” category, the concerned recognized stock exchange(s) shall send written intimation to the non-compliant listed entity calling upon it to comply with respective requirement(s) within 7 days of the date of the intimation.
B. Standard operating procedure for suspending the trading
If a listed entity complies with respective provisions of the Listing Regulations, no suspension proceedings would be initiated. However, before suspending the trading of a scrip, the concerned recognized stock exchange(s) shall send written intimationto the non-compliant listed entity calling upon it to comply with respective requirement(s) and pay the applicable fine within 21 days of the date of the intimation. While issuing the said intimation, the recognized stock exchange(s) shall also inform other recognized stock exchange(s) where the shares of the non-compliant entity are listed to ensure that the date of suspension is uniform across all the recognised stock exchange(s). Simultaneously, the recognized stock exchange(s) shall give a public notice on its website proposing possible suspension of trading in the shares of the non-compliant listed entity 30 days prior to date of suspension.
C. Standard operating procedure for revocation of suspension of trading.
If the non-compliant listed entity complies with the aforesaid requirement(s) after trading is suspended in the shares of the non-compliant entity, the recognized stock exchange(s) shall, on the date of compliance, give a public notice on its website informing compliance by the listed entity. The recognized stock exchange(s) shall revoke the suspension of trading of its shares after a period of 7 days from the date of such notice. While issuing the said notice, the recognized stock exchange(s) shall send intimation of the notice to other recognized stock exchange(s) where the shares of the entity are listed. After revocation of suspension, the trading of shares shall be permitted only in ‘Trade for Trade’ basis for a period of 7 days from the date of revocation and thereafter, trading in the shares of the entity shall be shifted back to the normal trading category.
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