INDIA: SEBI releases operating procedure for stock exchanges

Wednesday October 2 2013

To ensure that public shareholders do not suffer due to the suspension of trading in the stocks of non-compliant listed companies, the Securities and Exchange Board of India (SEBI) has issued a standard operating procedure for stock exchanges.

SEBI has stated that if a company does not comply with listing norms, rather than suspending trading of its stock, exchanges have to impose fines on a per-day basis on the company. In case of non-compliance for two consecutive quarters, the exchanges have been directed to move the shares of such a firm to a so-called “Z” category, where the trades are settled on a trade-for-trade basis. If the company remains non-compliant further, the exchange can freeze the shares of the promoter and promoter group. Only beyond this can trading in the company’s stock be suspended.

In order to provide an exit window for non-promoter shareholders suffering the effect of trading suspensions, SEBI has advised that, after 15 days of suspension trading, the shares should be made available on a “trade for trade” basis on the first trading day of every week for six months.

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