Financial Daily from THE HINDU group of publications
Wednesday, Feb 19, 2003
Financial Daily from THE HINDU group of publications Wednesday, Feb 19, 2003 |
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Markets
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Regulatory Bodies & Rulings Post-listing monitoring not to be part of CLA agenda initially K.R. Srivats
NEW DELHI, Feb. 18 THE Central Listing Authority (CLA), a self-regulatory authority that is being set up under the aegis of the Securities and Exchange Board of India (SEBI), will initially have no role on post-listing monitoring and compliance with the listing agreement. The SEBI regulations on Central Listing Authority, issued recently, has confined the initial role of the CLA to "processing the applications" made by corporates, mutual funds or collective investment schemes for letter of recommendation for listing and also for making recommendations on the listing conditions or provisions of the listing agreement. The CLA's recommendations on changes to the listing conditions and listing agreement would have to be forwarded to the board of SEBI. Even as the capital market regulator is empowered to add more functions to the CLA from time to time, the role of CLA in post-listing monitoring and compliance with the listing agreement is being seen to have a direct bearing on the future of small and regional stock exchanges in the country. Finance Ministry officials have in the past expressed a view that the CLA should undertake post-listing monitoring, which has been quite weak in India. CLA, which will be established from a date to be specified by the SEBI board, is expected to bring in uniformity in scrutinising listing applications besides reviewing the listing agreements periodically. The establishment of CLA is also expected to prevent fly-by-night operators from getting listed in smaller stock exchanges after their listing application is rejected by larger exchanges. A large number of retail investors in the country have in the last few years been victims of the inconsistent application of listing rules by different exchanges of the country. The proposed CLA will constitute a fund to be called the Central Listing Authority General Fund and all processing fees charged by the authority would be credited to this fund. The president and members of the CLA can hold office for a maximum period of three years. An applicant whose application for recommendation letter to listing has been rejected by CLA can make an appeal to the SEBI board to direct the CLA to grant a letter of recommendation. The SEBI board has also been empowered, through the latest regulations on CLA, to supersede the CLA for a specific period. CLA will also provide a quarterly report on their activities to the SEBI Board. The CLA that is being put into place in the country is a mid-path between the National Listing Authority of UK and the current system that exists in India. In UK, the National Listing Authority lays down the listing requirement, conducts due diligence for listing, post-listing monitoring and also compliance.
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