Public shareholding norms: Sebi will consider further action against errant promoters,says U K Sinha

Watchdog awaits feedback from companies that failed to meet shareholding norms

The Securities and Exchange Board of India (Sebi) will soon consider further action against promoters of companies yet to comply with the minimum public shareholding norms. Earlier this week,the market regulator barred such promoters from accessing the securities market apart from capping their voting rights and corporate benefits.

According to Sebi chairman U K Sinha,the watchdog will decide on the future course of action depending on the feedback it receives from the entities that failed to comply with the norms within the stipulated deadline of June 3.

It is an interim order. People have been asked to show cause. Case-by-case action will be taken depending on the inputs we receive, said Sinha,while speaking at the Skoch summit here in Mumbai.

In a 13-page order issued on Tuesday,Sebi penalised promoters of 105 companies for not bringing down their holding to 75%. Some of the well-known companies that are yet to comply with Sebi norms include Bombay Rayon Fashions,Essar Ports,Chettinad Cements,Mudra Lifestyle,Omaxe,Parshwanath,Plethico Pharmaceuticals,Tata Teleservices,Sundaram Clayton and Videocon Industries.

Sebi said promoters of companies that failed to meet the deadline would be prevented from receiving dividends and exercising their voting rights on excess shares that breach the 75% limit. Such promoters would also not be allowed a board seat in any listed company in India. The order further clarified that the regulator could also look at levying monetary penalty,initiating criminal proceedings,shifting companies in the trade-to-trade segment and excluding the companies from the derivatives segment if the norms are not complied with.

The Sebi chief further said that companies have to take the minimum public shareholding norms seriously as such measures would enhance the trust factor amongst the investor community.

We believe if these things are implemented and followed by everyone in the country it will generate a lot of trust in the market, he said.

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August 9 is the deadline for government-owned entities to bring down the promoter holding to 90%. The Sebi chairman reiterated that he has been assured by the government that they will follow the deadline. There are over 12 PSUs that currently have a promoter holding in excess of 90%.

Separately,the Sebi chief also said that the Know-Your-Customer (KYC) requirements are an important bottleneck and that Sebi is working closely with the Reserve Bank of India (RBI) and the Insurance Regulatory and Development Authority (Irda) to arrive at a common set of KYC which will be valid for all transactions across the financial sector.