Executive Summary:
This circular, effective for compliance periods ending on or after December 31, 2020, outlines a uniform structure for imposing fines on issuers of listed Non-Convertible Debt Securities, Non-Convertible Redeemable Preference Shares (NCRPS), and Commercial Papers for non-compliance with continuous disclosure requirements. It mandates Stock Exchanges to levy fines and take action as specified in Annexure I and II, and to disclose actions taken on their websites. The circular aims to ensure effective enforcement of disclosure obligations and protect investor interests.
Key Points / Main Content:
Fines for Non-Compliance:
Stock Exchanges must levy fines for non-compliance with continuous disclosure requirements by issuers of listed Non-Convertible Debt Securities, NCRPS, and Commercial Papers, as detailed in Annexure I and II.
Stock Exchanges can deviate from the specified fines only after recording reasons in writing.
Fines accrue until the non-compliance is rectified to the satisfaction of the Stock Exchange, irrespective of other disciplinary actions.
Fine amounts realized as per Annexure I shall be credited to the "Investor Protection Fund" of the concerned recognized stock exchange.
Uniform Action and Coordination:
If a non-compliant entity is listed on multiple exchanges, the exchanges must coordinate to take uniform action.
Implementation and Disclosure:
Stock Exchanges must implement the circular and disclose actions taken against non-compliant entities on their websites, including details of the requirement, fine amount, and action taken.
Stock Exchanges should inform issuers of listed Non-Convertible Debt Securities, NCRPS, and Commercial Papers about the circular's provisions.
Abeyance of Action:
Stock Exchanges may keep actions in abeyance or withdraw them in cases where specific exemptions from compliance or moratoriums on enforcement proceedings are provided by law or court orders.
Restrictions on Non-Compliant Entities:
Recognized Stock Exchanges and Electronic Book Providers (EBP) shall not allow issuance of any securities on EBP platform, or further listing of Non-Convertible Debt Securities, NCRPS, or Commercial Papers of non-compliant entities until compliance and fine payment are completed.
Once compliance is achieved, exchanges must update their website, and inform other exchanges and EBPs.
Board Notification:
Non-compliant entities must present the details of non-compliance and actions taken by the Stock Exchanges to their Board of Directors in the next meeting, and inform the exchanges of the Board's comments.
Impact Analysis:
Recognized Stock Exchanges:
Impact: Required to implement the uniform fine structure, monitor compliance, take action against non-compliant entities, coordinate with other exchanges, disclose actions on their websites, and potentially revise by-laws.
Action Required: Implement the circular, monitor compliance, levy fines, disclose actions, coordinate with other exchanges, credit fines to the Investor Protection Fund, and inform listed entities.
Issuers of Listed Non-Convertible Debt Securities, NCRPS, and Commercial Papers:
Impact: Subject to fines for non-compliance with continuous disclosure requirements. May face restrictions on further issuances and listings until compliance is achieved.
Action Required: Ensure compliance with continuous disclosure requirements, pay fines for non-compliance, and present non-compliance details to their Board of Directors.
Investors:
Impact: Protected through the enforcement of continuous disclosure requirements and the utilization of fines for investor protection.
Action Required: No direct action required.
Electronic Book Providers:
Impact: Must restrict non-compliant entities from issuing securities on their platform.
Action Required: Implement restrictions on non-compliant entities, and lift restrictions once compliance is achieved.
Key Entities Referenced
Securities and Exchange Board of India (SEBI): The regulatory body for securities markets in India, responsible for prescribing continuous disclosure norms and taking action under securities laws.
Securities and Exchange Board of India (Listing Obligations and Disclosure Requirements) Regulations, 2015 (SEBI LODR Regulations): Regulations pertaining to listing obligations and disclosure requirements for listed entities.
Non-Convertible Debt Securities (NCDs): A debt instrument that cannot be converted into equity shares.
Non-Convertible Redeemable Preference Shares (NCRPS): A type of preference share that cannot be converted into equity shares and is redeemable by the issuer.
Commercial Papers (CPs): A short-term unsecured promissory note issued by corporations to raise funds.
Investor Protection Fund: A fund maintained by recognized stock exchanges to protect the interests of investors.
Securities and Exchange Board of India Act, 1992: The act of the Parliament of India which gave SEBI statutory powers.
Securities Contracts Regulation Act, 1956: An act to prevent undesirable transactions in securities by regulating the business of dealing in securities.
CIRCULAR
SEBI/HO/DDHS/DDHS/CIR/P/2020/231 November 13, 2020
To,
All Recognized Stock Exchanges
All Depositories
All issuers of listed Non-Convertible Debt Securities and/or Non-Convertible
Redeemable Preference Shares
All Issuers of listed Commercial Papers
Sir/Madam,
Subject: Non-compliance with provisions related to continuous disclosures
1. SEBI has prescribed continuous disclosure norms for issuers of listed Non-
Convertible Debt Securities, Non-Convertible Redeemable Preference Shares
(NCRPS) and Commercial Papers, which are as follows:
(a) Securities and Exchange Board of India (Listing Obligations and Disclosure
Requirements) Regulations, 2015 (“SEBI LODR Regulations”) for issuers of
listed Non-Convertible Debt Securities and/or NCRPS.
(b) SEBI circular nos. SEBI/HO/DDHS/DDHS/CIR/P/2019/115 dated October
22, 2019 and SEBI/HO/DDHS/DDHS/CIR/P/2019/167 dated December 24,
2019 for issuers of listed Commercial Papers.
2. Further, the following provisions provide for monitoring of compliance and
imposition of fines by stock exchanges:
(a) Sub regulation (1) of Regulation 97 of SEBI LODR Regulations, provides for
monitoring of compliance by listed entities with the provisions of the
regulation by recognized Stock Exchanges. Further, sub regulation (1)(a) of
Regulation 98 of SEBI LODR Regulations provides for imposition of fines by
Stock Exchanges for contravention of provisions of the regulation by listed
entities.
(b) SEBI circular no. SEBI/HO/DDHS/DDHS/CIR/P/2019/115 dated October 22,
2019 provides for a framework for imposition of fine to be put in place by
stock exchanges in cases of non-compliance and/ or inappropriate
disclosures by issuers of listed Commercial Papers.
13. In respect of listed specified securities (i.e. equity shares and convertible
securities), SEBI issued circular no. SEBI/HO/CFD/CMD/CIR/P/2020/12, dated
January 22, 2020, specifying a uniform structure for imposing fines for issuers
not in compliance with certain provisions of SEBI LODR Regulations.
4. Accordingly, in order to ensure effective enforcement of continuous disclosure
obligations by issuers of listed Non-Convertible Debt Securities or NCRPS or
Commercial Papers, it has been decided to lay down a similar uniform structure
for imposing fines for non-compliance with continuous disclosure requirements
after discussion with market participants.
5. In view of the above, in the interests of investors and the securities market, the
Stock Exchanges shall levy fine and take action in case of non-compliances with
continuous disclosure requirements by issuers of listed Non-Convertible Debt
Securities and/ or NCRPS and/ or Commercial Papers as specified in Annexure
I and Annexure II of this circular respectively.
Stock Exchanges may deviate from the above, if found necessary, only after
recording reasons in writing.
6. In case a non-compliant entity is listed on more than one recognized stock
exchange, the concerned recognized stock exchanges shall take uniform action
under this circular in consultation with each other.
7. The recognized stock exchanges shall take necessary steps to implement this
circular and shall disclose on their website the action(s) taken against the entities
for non-compliance(s); including the details of the respective requirement,
amount of fine levied/ action taken etc.
8. The amount of fine realized as per the structure provided in Annexure I of this
circular shall be credited to the "Investor Protection Fund" of the concerned
recognized stock exchange.
9. The fines specified in Annexure I of this circular shall continue to accrue till the
time of rectification of the non-compliance and to the satisfaction of the
concerned recognized stock exchange. Such accrual shall be irrespective of
any other disciplinary/enforcement action(s) initiated by recognized stock
exchange(s)/SEBI.
10. The recognized stock exchanges may keep in abeyance the action or withdraw the
action in specific cases where specific exemption from compliance with the
2requirements for continuous disclosures /moratorium on enforcement proceedings
has been provided for under any Act, Court/Tribunal Orders etc.
11. The above provisions are without prejudice to the power of SEBI to take action
under the securities laws.
12. The recognized stock exchanges are advised to bring the provisions of this circular
to the notice of issuers of listed Non-Convertible Debt Securities, NCRPS,
Commercial Papers.
13. This provisions mentioned in this circular shall come into force for compliance
period ending on or after December 31, 2020.
14. This circular is issued in exercise of the powers conferred under sections 11(1) and 11A(2)
of the Securities and Exchange Board of India Act, 1992 read with Section 9 and 21 of
Securities Contracts (Regulation) Act, 1956.
15. The recognized stock exchanges may make consequent changes in their byelaws,
if any, to implement this circular.
16. This circular is available on SEBI website at www.sebi.gov.in under the category
“Legal”.
Yours faithfully,
Sabir Vasant Sawant
Deputy General Manager
Department of Debt and Hybrid Securities
Email id: sabirvs@sebi.gov.in
3ANNEXURE I
PART A: Fine to be levied in case of non-compliances by issuers of listed Non-
Convertible Debt Securities and/or Non-Convertible Redeemable Preference
Shares
1. The recognized stock exchanges shall take action for non-compliance with the
provisions of the SEBI LODR Regulations & circulars/ guidelines issued
thereunder, by an entity having listed Non-Convertible Debt Securities and/or
NCRPS, as under:
Sl. No. Regulation Fine payable and/or
other action to be taken
for non-compliance in
respect of an entity
having listed its Non-
Convertible Debt
Securities and/or
NCRPS
(a) Applicable Regulations for Chapter III Fine payable as per SEBI
(Common obligations of listed entities) of circular no.
SEBI LODR Regulations for which penalty SEBI/HO/CFD/CMD/CIR/
has been specified vide SEBI circular no. P/2020/12 dated January
SEBI/HO/CFD/CMD/CIR/P/2020/12 dated 22, 2020 as amended from
January 22, 2020 as amended from time to time to time.
time.
(b) Regulation 50 (1)/ (3)
Delay in furnishing prior intimation with Rs. 1,000 per ISIN
respect to date of payment of interest /
redemption amount or intimation regarding
board meeting effecting the rights or interest
of holders of NCDs/NCRPS.
(c) Regulation 52(1)
Non-submission of the financial results Rs. 5,000 per day
within the period prescribed under this
regulation.
1(d) Regulation 52(4) / 52(6)
Non-disclosure of line items prescribed Rs. 1,000 per day
under Regulation 52(4) along with the half
yearly / annual financial results or non-
disclosure of items pertaining to NCRPS as
notes to financials prescribed under
Regulation 52(6).
(e) Regulation 52(5)
Non-submission of a Certificate signed by Rs. 1,000 per day
the Debenture Trustee taking note of the
contents prescribed under regulation 52(4).
(f) Regulation 52(7)
Non-submission of deviations/ variations in Rs. 1,000 per day
utilization of issue proceeds.
(g) Regulation 54 (2)
Non-disclosure of extent and nature of Rs.1,000 per day
security created and maintained with
respect to secured listed NCDs in the
financial statements.
(h) Regulation 57(1)
Non-disclosure of information related to Rs. 1,000 per day per
payment obligations. ISIN
(i) Regulation 59 (1)
Failure to obtain prior approval of stock Rs. 50,000 per instance
exchange for any structural change in terms
of NCDs/ NCRPS.
(j) Regulation 60 (2)
Delay in submission of the notice of
Rs. 10,000 per ISIN
record date.
2(k) Regulation 62 Advisory/warning letter
per instance of non-
Non-compliance with norms pertaining to
compliance per item
functional website
Rs. 10,000 per instance
for every additional
advisory/warning letter
exceeding the four
advisory/ warning letters
in a financial year.
2. In case of 1(c) above, wherein the listed entity has listed both specified securities
and/or Non-Convertible Debt Securities and/or NCRPS, and if the concerned
recognized stock exchange(s) has already levied a penalty for non-compliance
of Regulation 33 of SEBI LODR Regulations in terms of SEBI circular no.
SEBI/HO/CFD/CMD/CIR/P/2020/12 dated January 22, 2020, then penalty shall not
be imposed again for violation of Regulation 52(1) in terms of this circular.
PART B: Fine to be levied in case of non-compliances by issuers of listed
Commercial Papers
1. The recognized stock exchanges shall take action for non-compliance with
continuous disclosure requirements in terms of SEBI circular nos.
SEBI/HO/DDHS/DDHS/CIR/P/2019/115 dated October 22, 2019 and
SEBI/HO/DDHS/DDHS/CIR/P/2019/167 dated December 24, 2019, as amended
from time to time, by an entity having listed Commercial papers as under:
Sl. Clause Fine payable and/or other
No. action to be taken for non-
compliance in respect of an
entity having listed Commercial
Paper
(a) Non-submission of financial Rs. 5,000 per day
results within the prescribed
period
3(b) Non-disclosure of line items Rs. 1,000 per day
prescribed under Regulation
52(4) of SEBI LODR Regulations
along with the half yearly / annual
financial results
(c) Non-submission of certificate Rs. 1,000 per day per ISIN
regarding fulfillment of payment
obligations
2. In case of 1(a) & 1(b) above, wherein the entity has listed its specified securities
and/or Non-Convertible Debt Securities and/or NCRPS, and if the concerned
recognized stock exchange(s) has already levied a penalty for non-compliance
of Regulation 33 or Regulation 52(1) and/or Regulation 52(4) of SEBI LODR
Regulations under SEBI circular no. SEBI/HO/CFD/CMD/CIR/P/2020/12 dated
January 22, 2020 and/or Part A of Annexure I of this circular as applicable, then
penalty shall not be imposed again for non-submission of disclosures specified at
1(a) & 1(b) above.
**********
4Annexure II
Action to be taken in case of non-compliances by issuers of listed Non-
Convertible Debt Securities and/or Non-Convertible Redeemable Preference
Shares and/or Commercial Papers
1. Every recognized stock exchange shall review the compliance status of the
entities having listed their Non-Convertible Debt Securities and/or NCRPS
and/or Commercial Papers and shall issue notices to the non-compliant entities
within 30 days from the due date of prescribed timeline. Non-compliant entity
shall ensure compliance with the requirement(s) and pay fines as per the circular
within 15 days from the date of such notice. If the non-compliant entity fails to
comply with the aforesaid requirement(s) and/or pay fine levied within the
stipulated period as per the notice stated above, the concerned recognized stock
exchange(s) shall, upon expiry of the period indicated in the notice, shall issue
reminder notices to such non-compliant entities, to ensure compliance with the
requirement(s) and pay fines within 10 days from the date of such notice. While
issuing the aforementioned notices, the recognized stock exchange shall also
send intimation to other recognized stock exchange(s) where the Non-
Convertible Debt Securities or NCRPS or Commercial Papers of the non-
compliant entity are listed.
2. If the non-compliant entity fails to comply with the aforesaid requirement(s)
and/or pay fine levied within the stipulated period as per the notice stated above,
the concerned recognized stock exchange(s) shall send intimation to other
recognized stock exchange(s) and all entities allowed to act as Electronic Book
Provider, regarding failure of compliance of such entity.
3. The recognized stock exchange(s) and/ or other entities allowed to act as
Electronic Book Provider, thereafter, shall not allow:
(a) issuance of any securities, as defined under SEBI circular no.
SEBI/HO/DDHS/CIR/P/2018/05 dated January 05, 2018 by such non-
compliant entity on EBP Platform;
(b) further listing of Non-Convertible Debt Securities or NCRPS or Commercial
Papers of such non-compliant entity.
4. The restrictions mentioned at para 3.(a) & (b) above shall continue until the non-
compliant entity subsequently complies with the respective requirement(s) and
pays the fine levied. Further, if the non-compliant entity subsequently complies
with the respective requirement(s) and pays the fine levied, in terms of this
Circular, the concerned recognized stock exchange(s) shall display on their
website compliance and status of fines paid by such entity. Simultaneously, the
1concerned recognized stock exchange(s) shall intimate other recognized stock
exchange(s), other entities allowed to act as Electronic Book Provider regarding
compliance of such entity.
5. The recognised stock exchange(s) shall also advise the non-compliant entity to
ensure that the subject matter of non-compliance which has been identified and
indicated by the recognised stock exchange(s) and any subsequent action taken
by the recognised stock exchange(s) in this regard shall be placed before the
Board of Directors of the entity in its next meeting. Comments made by the board
shall be duly informed to the recognised stock exchange(s) for dissemination.
**********
2