Securities and Exchange Board of India



November 18, 2013


All Stock Exchanges

All Recognised Stock Exchanges

Dear Sir(s)/Madam(s),

Sub: Compliance with the provisions of Equity Listing Agreement by listed companies – Monitoring by Stock Exchanges

1. The Equity Listing Agreement mandates listed companies to make periodic and event based disclosures which are price sensitive in nature and which will have bearing on the performance/operations of the company.

2. SEBI vide circular No. CIR/MRD/DSA/31/2013 dated September 30, 2013 streamlined the processes and procedures with regard to actions for non­compliance of certain listing conditions which had so far been considered as grounds for suspension of trading by the recognized Stock Exchanges. It was decided that recognized Stock Exchanges shall use imposition of fines as action of first resort in case of such non-compliances and invoke suspension of trading in case of subsequent and consecutive defaults. In order to maintain consistency and uniformity in approach in this regard, SEBI has laid down (i) Uniform fine structure for non-compliance of certain clauses of the Listing Agreement; and (ii) Standard operating procedures for suspension and revocation of suspension of trading in the shares of such listed entities. It was also mandated that every recognized Stock Exchange shall put in place the system to monitor and review the compliance of respective listing conditions by the listed companies.

3. Concerns have been raised that even though listed companies make disclosures to Stock Exchanges within the timeframe stipulated under the Listing Agreement; the contents of the disclosures made by such companies are not adequate and accurate. Therefore, investors are unable to take informed investment decisions based on such disclosures. IMF has in its report on ” India: Financial Sector Assessment Program- Detailed Assessments Report on IOSCO Objectives and Principles of Securities Regulation “, inter-alia, pointed out:

i. “….. Mechanisms to ensure compliance with listing obligations in India, which include periodic reporting, are a responsibility of the RSES. Such mechanisms have limitations.”

ii “…. the information provided shows that the RSEs (recognized Stock exchanges) review periodic reports. However, such information (for examples, the minutes of the committee on non-compliance) leads to conclude that the RSEs have also not acted as vigorously as necessary in enforcing compliance by issuers with the listing/reporting conditions       “

4.  Thus, it is felt that the current monitoring mechanism of Stock Exchanges to ascertain the adequacy and accuracy of disclosures made in compliance with the Listing Agreement need to be made more effective.

5. Accordingly, in continuation of Circular dated September 30, 2013 and pursuant to the discussions with the Recognised Stock Exchanges and market participants, in order to address the above mentioned concerns, the Recognised Stock Exchanges are advised to:

5.1 Put in place appropriate framework (including adequate manpower) to effectively monitor the adequacy and accuracy of the disclosures made by listed companies;

5.2  Devise the framework in such a way that it detects any non-compliance / violation of the provisions of Securities Contracts (Regulation) Act, 1956, Securities and Exchange Board of India Act, 1992, the Rules and Regulations made there under, Listing Agreement, and any other applicable laws. Some indicative parameters to be included in the said framework are given at Annexure I;

5.3 Put in place an appropriate mechanism for handling complaints related to such inadequate and inaccurate disclosures and non-compliances mentioned in clause 5.2;

5.4 Treat inadequacy and inaccuracy of disclosure as non-compliance, wherever applicable and proceed further as per the Standard Operating Procedure laid down by SEBI vide Circular No. CIR/MRD/DSA/31/2013 dated September 30, 2013;

5.5 Submit to SEBI an “Exception Report” in addition to the existing reporting requirements, with the details of companies which do not respond to the clarifications sought by them and/or where the response submitted by the company is not satisfactory in the opinion of the Stock Exchange. The format of the Exception Report is given at Annexure-II; and

5.6 Obtain the details of the promoters / directors and/or Key Managerial Personnel of the listed companies who shall be responsible for ensuring compliance with the provisions of the Listing Agreement and in case of defaults, disclose such details on its website.

6. In order to enable the Recognised Stock Exchanges and the listed companies to put in place adequate infrastructure to ensure compliance with the requirements of this Circular, Recognised Stock Exchanges shall begin with monitoring the adequacy and accuracy of disclosures made by top 500 listed companies (by market capitalization as on March 31, 2013) in compliance with Clauses 35, 36, 41 and 49 of the Equity Listing Agreement for the quarter ending December 31, 2013.

7. This Circular is being issued in exercise of the powers conferred under Section 11 read with Section 1 1A of the Securities and Exchange Board of India Act, 1992.

8. This Circular is available on SEBI website at under the categories “Legal Framework” and “Issues and Listing”.

Yours faithfully,

Anindya Kumar Das
Deputy General Manager
[email protected]


Annexure-I: Indicative parameters to be included in the monitoring framework. Annexure-II: Format of exception report to be submitted to SEBI

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