This is the first major crackdown by the stock exchanges after Sebi directed them late last year to put in place a "Standard Operating Procedure (SOP)" for dealing with listed companies not complying with the Listing Agreement.
Under this agreement, companies are required to submit documents like annual reports, shareholding pattern data, quarterly and full-year financial results, as also corporate governance compliance reports within stipulated time periods.
After finding hundreds of companies of not adhering to various provisions of this agreement, the regulator had asked the stock exchanges to put a stronger mechanism in place to ensure compliance.
Despite the new norms coming into effect from the quarter ended December 31, 2013, the exchanges have come across at least 1,107 cases of non-compliance by hundreds of companies for the three-month period.
A large number of such companies have been found to be non-compliant to the Listing Agreement disclosure norms on more than one count and have been imposed with multiple penalties.
According to available data, NSE has imposed fine on 32 companies, while it has suspended trading in shares of 117 companies.
On the other hand, BSE has imposed fine on 309 companies for late or non-disclosure of shareholding data, while 396 companies have faced action for delayed or no filing of corporate governance reports.
Besides, 255 companies have also been taken to task by BSE for non-compliance to provisions that require filing of audit report for reconciliation of share capital.
While the amounts of fine are not big -- a few thousands of rupees in most cases -- because of these being first non-compliance since the new rules came into place, the penalties would further increase for repeat offenders.
The companies found to be non-compliant to one or more provisions for disclosures required for the quarter ended December 31, 2013, include Consolidated Construction Consortium, Samtel, Crest Animation Studios, MVL, PTC India, LCC Infotech, NEPC India, Simplex Infrastructures, Jindal Poly Films, Zylog Systems, Clutch Auto and Birla Cotsyn.
These also include Amar Remedies, Ankur Drugs, Blue Bird India, Edserv Softsystems, Koutons Retail, SBI Home Finance, Taksheel Solutions, Teledata Technology Solutions, Anu's Laboratories, Akzo Nobel India, Samtel India, Amtek Auto, Amtek India, Arvind International, Hanung Toys, Nirlon Ltd, Venus Remedies, Birla Shloka Edutech, Asahi Infrastructure, Encore Software, Force Motors, Ind-Swift and Tulip Telecom. Under the new mechanism, the initial penal action would be a minimum fine of Rs 1,000-5,000 per day depending on the violation, while repeated offences would lead to actions like transfer to restricted-trade category, freezing of promoter shares and overall suspension on trading in company shares.
The companies need to submit their Annual Reports at least 21 days in advance of their annual shareholding meeting, which needs to be held within six months from the end of the company's financial year.
Besides, the quarter-end shareholding pattern needs to be submitted in a prescribed format within 21 days from the end of a quarter. The financial results needs to be submitted within 60 days from the end of the quarter (where it is the final quarter) and within 45 days for other quarters.
The companies need to submit their corporate governance compliance reports within 15 days from the end of every quarter.
Listed companies failing to submit financial results within the stipulated time would attract a penalty of Rs 5,000 per day till it is in compliance with the norms. For subsequent non-compliance, penalty would be Rs 10,000 per day.
In case of non submission of corporate governance compliance report, the fine would be Rs 1,000 per day and for subsequent violations, the penalty would be Rs 2,000 per day.
Besides, a new category 'Z' has been created for trading of shares of non-compliant listed entities wherein trades shall take place in 'trade for trade' basis. Later, the trading in scrips of non-compliant company could be suspended.
The Equity Listing Agreement mandates listed companies to make periodic and event based disclosures on the stock exchange platform for any information which are price sensitive in nature and which may have bearing on the performance or operations of the company.
Sebi has asked all stock exchanges, which function as front-end regulators in the securities market, to beef up their monitoring to ensure greater compliance by the listed companies to various provisions of this Listing Agreement.
The regulator has also directed the stock exchanges to set up a separate monitoring cell with identified personnel to ensure compliance with its new directions.
The move followed concerns that even though listed companies make disclosures to stock exchanges within the time frame stipulated under the Listing Agreement, the contents of the disclosures were not adequate and accurate.
Therefore, investors were unable to take informed investment decisions based on such disclosures.