A public interest litigation (PIL) suggests there could be 1,000 companies listed on regional stock exchanges which are non-compliant with the listing agreement. The amount of capital tied up in these companies is estimated to be Rs 1 lakh crore and the number of investors affected could be as high as 10 million, according to the PIL.
Midas Touch, an investor association registered with Sebi, filed the complaint before the regulator came out with new norms asking exchanges to take stringent action against non-compliant companies.
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Compliance refers to companies abiding by the listing agreement through which they made their shares available for trading on exchanges. These require companies to make key information available on a periodic basis to investors. That includes quarterly company financials, changes in shareholding and if they are adhering to corporate governance norms.
Sebi wrote to all exchanges, including regional ones, to ensure that non-compliant companies are pulled up under the new norms. It also asked that regional exchanges put up on their website names of all their listed companies, in addition to their details such as the name of the promoter and the address of the company's head office.
Regional exchanges, many of which are defunct and in the process of being wound up, have been facing difficulties in getting companies to ensure compliance.
"The size of the companies is very small… some of them can be as low as Rs 25 lakh. Many don't have the resources… they do not have a full-time compliance officer," said an exchange official with a regional stock exchange . "We have written to Sebi about the difficulties," the person added.
Some companies have pointed out that the listing agreement requires exchanges to provide a trading platform, a requirement which many defunct exchanges now lack.
Virendra Jain, founder of Midas Touch Investors Association, suggests companies which have already listed cannot cite a resource crunch for non-compliance and should look to delist if that is the case. The number of non-compliant companies on nationalised exchanges is reportedly said to account for a fifth of the total listed entities on the National Stock Exchange and the BSE.
Meanwhile, the proportion of non-compliant ones on regional exchanges is said to be 30-40 per cent of their exclusive listed base, according to a regional exchange source.