Securities and Exchange Board of India (SEBI)
SED/SMD/4606/95
December 7, 1995
To,
The President / Executive Director / Managing Director
of all the recognised stock exchanges
Dear Sir,
Bad delivery- amendment. to clause 12(A)
The Bombay Stock Exchange had considered the problem of bad deliveries and proposed to amend the listing agreement by adding a new clause 12A to the listing agreement. SEBI has conveyed its approval to the amendments proposed by the Exchange.
In this connection, SEBI had also appointed a Group to look into the problems relating to transfer of shares by companies. A copy of the report, which was sent earlier also, is enclosed for your ready information and perusal. You are requested to please amend the listing agreement by adding a new clause 12A on the lines given below –
12A(1) The Company agrees that when proper documents are lodged for transfer and there are no material defects in the documents except minor difference in signature of the transferor(s),
( i )then the Company will promptly send to the first transferor an intimation of the aforesaid defect in the documents, and inform the transferor that objection, if any, of the transferor supported by valid proof, is not lodged with the Company within fifteen days of receipt of the Company’s letter, then the securities will be transferred;(ii) if the objection from the transferor with supporting documents is not received within the stipulated period, the company shall transfer the securities provided the Company does not suspect fraud or forgery in the matter.
(2) The Company agrees that when the signature of transferor(s) is attested by a person authorised by the Department of Company Affairs, u/s 108(1A) of the Companies Act, 1956, then it shall not refuse to transfer the securities on the ground of signature difference unless it has reasons to believe that a forgery or fraud is involved.
Further, with a view to monitor the position of the companies delaying the transfer of shares, you are requested to please obtain the details from member-brokers of your Exchange and forward a list of top ten such companies to us every quarter to enable us to take further necessary action in the matter.
a) It is also proposed that some further changes in the system of share certification, rectification of bad delivery etc., could be introduced in the stock exchanges on the lines as under :b) It will be mandatory for the introducing member-broker to countersign the seller’s signature. The member-brokers may evolve their own arrangements to ensure that they are in a position to do so in case the shares have been sold by the client(s) through sub-broker(s).
c) In case of bad delivery, a mechanism needs to be evolved so that the liability could be fixed straight away on the introducing broker. It should not be necessary for the buyer / buyer’s broker as per the existing practice to go through each step of the chain of member- brokers appearing on the reverse of the transfer deed for rectification of bad delivery.
The Exchange should also keep a broker-wise record of bad delivery received from the market and take deterrent action against member-brokers having unsatisfactory record of bad deliveries. Bad delivery on account of signature difference may be segregated from that on account of forged/stolen or fake share certificates. In the latter case stringent disciplinary action should be taken by the Exchange.
Before we take a view on the above changes, you are requested to send us your views/ comments urgently, if necessary by discussing the matter in the Governing Board / Council of Management of your Exchange. We expect your views / comments within fortnight.
Please acknowledge receipt of the letter.
Yours faithfully,
sd/-
