SEBI takes action against companies for non compliance of SEBI Circular dated June 05, 2015

Aug 02, 2019 | by Avantis RegTech Legal Research Team


The Securities Exchange Board of India (SEBI) on August 01, 2019, has issued a Circular directing all depositories to freeze all the securities held by the promoters and directors of the listed companies that are not in compliance with the provisions of SEBI Circular no. CIR/MRD/DP/10/2015 dated June 05, 2015. Regulation 75 of the SEBI (Depositories and Participants) Regulations, 2018 mandates issuer or its agent to daily reconcile the records of dematerialized securities with all securities issued by them. The aforesaid Circular mandates insurers to take all necessary steps to update Distinctive Number (DN) information in respect of all physical share capital and overall DN range for dematerialized share capital for all listed companies. In case of any mismatch in the DN information with the data provided or updated by the Stock Exchanges in the DN database, the Issuer or RTA shall take steps to match the records and update the same latest by December 31, 2015. The aforesaid circular dated June 05, 2015 also stipulated that failure by the Issuers or RTAs to ensure reconciliation of the records in terms of the said circular shall attract appropriate actions under the extant laws.

Despite follow-ups by Depositories, certain companies yet not complied with the aforesaid Circular. Hence in order to protect the interest of investors, SEBI has directed all depositories that, with effect from August 01, 2019:

i. They shall freeze all the securities held by the promoters and directors of the listed companies that are not in compliance with the provisions of SEBI Circular dated June 05, 2015 [i.e. Beneficiary Owner account level freezing].

ii. They shall not effect any transfer, by way of sale, pledge, etc., of any of the securities, held by the promoters and directors of such noncompliant companies. 

iii. They shall freeze all related corporate benefits on the Beneficiary Owner account frozen as above. 

iv. They shall retain the freeze on the securities held by promoters and directors of non-compliant companies till such time the company complies with the directions provided in SEBI circular dated June 05, 2015.

The names of companies shall be prominently disseminated on the website of the exchanges or depositories, indicating that the concerned companies have not complied with SEBI Circular dated June 05, 2015. The depositories prior to revocation of suspension of trading of shares of any company, exchanges should ensure availability of updated details of company’s promoters (especially their PAN) and directors (especially their PAN and DIN), apart from ensuring compliance with other applicable regulatory norms.

[Circular No. SEBI/HO/MRD/DOP2DSA2/CIR/P/2019/87]


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