SEBI to move against non-compliant firms

The Securities and Exchange Board of India (SEBI) has initiated action against non-compliant “Exclusively Listed Companies (ELCs) on Dissemination Board (DB),” and its directors and promoters.

Non- compliant firms

  • These are companies which were earlier listed on regional stock exchanges (RSEs) that have been de-recognised by the regulator.
  • Such companies were allowed to be part of the national exchanges through a dissemination board but were directed to submit a plan of action for listing or providing an exit option to shareholders.

What’s the issue?

  • These firms were supposed to submit their plan of action. The deadline to submit the plan of action was extended until June 30. As per SEBI, of the 2,000 companies listed on dissemination board as on June 30, there are 536 entities that are traceable and yet not submitted a plan of action.

SEBI’s powers to punish non- compliant firms

  • SEBI can bar such promoters and companies from accessing the securities market for a period of 10 years apart from freezing the shares held by promoters and directors. The regulator can even attach the bank accounts and other assets of promoters and directors to compensate the investors.

Background: The Securities and Exchange Board of India (SEBI) is the regulator for the securities market in India. It was established in the year 1988 and given statutory powers on 12 April 1992 through the SEBI Act, 1992.

Important functions performed by SEBI

  • Approve by−laws of stock exchanges.
  • Require the stock exchange to amend their by−laws.
  • Inspect the books of accounts and call for periodical returns from recognized stock exchanges.
  • Inspect the books of accounts of financial intermediaries.
  • Compel certain companies to list their shares in one or more stock exchanges.
  • Register brokers.
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