CIRCULAR
SEBI/HO/MRD/MRD-PoD-3/P/CIR/2024/139 October 14, 2024
To
All Recognized Stock Exchanges
All Recognized Clearing Corporations
All Depositories
All Registrar and Transfer Agents
Sir/Madam,
Subject: Monitoring Shareholding of Market Infrastructure Institutions (MIIs)
1. Paragraph 2.4 of Chapter 6 of SEBI Master Circular No. SEBI/HO/MRD2/PoD-
2/CIR/P/2023/171 dated October 16, 2023 for ‘Stock Exchanges and Clearing
Corporations’, paragraph 4.76 of Section 4 of SEBI Master Circular No.
SEBI/HO/MRD/MRD-PoD-2/P/CIR/2023/166 dated October 06, 2023 for
‘Depositories’ and paragraphs 15.1.1 (IV) & (V) of Chapter 15 of SEBI Master
Circular No. SEBI/HO/MRD/MRD-PoD-1/P/CIR/2023/136 dated August 04, 2023
for ‘Commodity Derivatives Segment’ prescribes the procedure for ensuring
compliance with Securities Contracts (Regulation) (Stock Exchanges and Clearing
Corporation) Regulations, 2018 (‘SECC Regulations, 2018’) by listed Stock
Exchanges.
2. SEBI vide letter dated July 17, 2017 addressed to depositories and stock
exchanges issued guidelines on monitoring of ownership and other provisions of
the Securities Contracts (Regulation) (Stock Exchanges and Clearing
Corporations) Regulations, 2012 and SEBI (Depositories and Participants)
Regulations, 2012 for listed stock exchanges and listed depositories.
3. In order to ensure ease of compliance and effective monitoring of the provisions
related to minimum public shareholding, other shareholding limits and fit & proper
criteria under SECC Regulations, 2018 and SEBI (Depositories and Participants)
Regulations, 2018 (D&P Regulations, 2018) by Stock Exchanges, Clearing
Corporations and Depositories (collectively referred as Market Infrastructure
Institutions (MIIs)), based on the recommendations of Secondary Markets Advisory
Committee of SEBI and subsequent deliberations, it has been decided that –
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3.1. The framework for monitoring and ensuring compliance with shareholding norms
currently applicable to listed Stock Exchanges and listed Depositories shall be
applicable to all MIIs (i.e. both listed and unlisted); and
3.2. All MIIs shall disclose their shareholding pattern as per the requirements and
formats specified for listed companies under SEBI (Listing Obligations and
Disclosure Requirements) Regulations, 2015 (LODR Regulations, 2015) on their
respective websites.
4. In view of the above, the framework for monitoring of the shareholding norms of
MIIs is as under:
4.1. Every MII shall appoint a depository as “Designated Depository (DD)” for the
purpose of monitoring of their shareholding limits as per SECC Regulations,
2018 and D&P Regulations, 2018, as applicable. The DD of an MII, shall not be
an associate (as defined under SECC Regulations, 2018) of the MII. In case of
depository, the other depository shall be appointed as DD for monitoring its
shareholding limits.
However, in case the ISIN of any MII is frozen for debits by the company (MII),
the appointment of DD is not required for monitoring the shareholding limits of
that MII. In such case, the MII shall verify the shareholding limits prior to recording
the transfer of its shares.
4.2. All MIIs shall disclose their shareholding with category wise breakup as per the
requirements and formats specified for listed companies under SEBI (Listing
Obligations and Disclosure Requirements) Regulations, 2015 (LODR
Regulations, 2015) on a quarterly basis on their respective websites. In case of
listed MII, the stock exchange where the shares are listed, shall also display the
above information.
4.3. The MIIs shall at the time of appointment of the DD provide the details of paid-
up equity share capital including the number of shares to the DD and as and
when there are changes, the same shall be informed to the DD on End of Day
(EoD) basis.
4.4. The DD shall monitor and inform the MII and stock exchange on which its shares
are listed (in case of listed MII), as and when the threshold limit of 5% or 15%,
as applicable under SECC Regulations, 2018 and D&P Regulations, 2018, is
breached and take appropriate consequential actions, as mentioned at
paragraph 4.9 of this circular.
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4.5. The DD shall monitor and inform the MII and stock exchange on which its shares
are listed (in case of listed MII), as and when threshold limit of combined holding
of 49% of all persons’ resident outside India (directly or indirectly, either
individually or together with persons acting in concert) in the paid-up equity share
capital of an MII is breached and take consequential actions as mentioned at
paragraph 4.9 of this circular.
4.6. For Stock Exchanges:
4.6.1. The DD shall:
4.6.1.1. Have mechanism for coordination between the depositories for sharing of
information regarding the shareholding of the stock exchange and ensure
that the shareholding of Trading Members (TMs), their associates and
agents does not exceed 49% of the paid-up equity share capital of the stock
exchange.
4.6.1.2. Monitor the aggregate shareholding limit of the TMs, their associates and
agents based on their demat balance, on a daily basis, at the end of the day.
At the time of appointments of DD, all stock exchanges shall share the list of
TMs, their associates and agents including their PANs, contact details, e-
mail IDs with the DD and subsequent changes there off shall also be
informed to the DD to facilitate monitoring of demat balances. Stock
exchanges shall give suitable instructions to their members to provide the
details of their associates & agents and subsequent changes, if any.
4.6.1.3. Generate aggregate shareholding reports of TMs, their associates and
agents on daily basis. The report shall be shared with the stock exchange,
its Registrar & Transfer Agent (RTA), the stock exchange where it is listed
(in case of listed stock exchange) and other depository. Post receipt of such
report from DD, the stock exchange shall disseminate the aggregate
shareholding percentage of TMs, their associates and agents on its website
on a daily basis.
4.6.1.4. Send alerts to the stock exchange and TMs, their associates and agents
about the breach of the caution shareholding limit of 45% by TMs, their
associates and agents and the said information shall also be disclosed on
the exchange website and the website of stock exchange where it is listed
(in case of listed stock exchange).
4.6.1.5. Inform to the stock exchange, its RTA, the stock exchange where it is listed
(in case of listed stock exchange) and other depository about any breach of
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shareholding limit of 49% by TMs, their associates and agents. Stock
exchange shall disseminate such breach on its website and the website of
stock exchange where it is listed (in case of listed stock exchange).
4.6.2. The other depository shall provide on a daily basis the demat holdings of each
TMs, their associates and agents in the stock exchange(s) held in its system at
the End of Day (EOD) to the DD for computation of shareholding.
4.6.3. The TMs, their associates and agents shall obtain prior approval of the stock
exchange(s) before acquisition of further shares, once the aggregate
shareholding of all TMs, their associates and agents crosses the caution limit
of 45%. The stock exchange shall provide to the DD the list of PANs which have
sought approval for fresh purchases in the ISIN which has reached the caution
limit. Such fresh purchases by a TM, their associates and agents who has
obtained approval shall be marked as 'Approval obtained from Exchange'. In
case any of the TMs, their associates and agents purchase shares without such
approval of the stock exchange, the DD shall inform the same to the stock
exchange and shall initiate appropriate consequential action as mentioned at
paragraph 4.9 of this circular.
4.6.4. The TMs, their associates and agents shall also refer to the aggregate
shareholding pattern under the category of TMs, their associates and agents,
to determine/ascertain the available head room before placing the order.
4.7. For recognized Clearing Corporations (CCs)
4.7.1. The DD shall monitor that at least 51% of paid-up equity share capital of a CC
shall always be held by one or more recognized stock exchange(s) and no
recognized stock exchange shall, directly or indirectly, either individually or
together with persons acting in concert, acquire or hold more than 15% of the
paid-up equity share capital in more than one CC and take consequential
actions as mentioned at paragraph 4.9 of this circular in case of any breach.
However, the provision at paragraph 4.7.1 would not be applicable to AMC
Repo Clearing Limited (ARCL).
4.8. Fit and Proper
4.8.1. All the shareholders should be fit and proper persons at all times. For
shareholding of a person who directly or indirectly, acquires or holds two
percent or more equity shares or voting rights of any recognized stock
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exchange or depository, the MII shall ensure that such shareholders are fit and
proper at all times.
4.8.2. The MIIs shall notify on its website and undertake all measures to make
investors aware of the requirement of eligibility for acquiring or holding its
shares and fit and proper criteria for being its shareholders as per Regulation
19 and 20 of SECC Regulations, 2018 and Regulations 22 and 23 of D&P
Regulations, 2018, as applicable.
4.8.3. In the pre-listing scenario, the exchange and depository coming out with a
public offering shall include a declaration in the application form stating that the
applicant is fit and proper in terms of Regulation 19 and 20 of SECC
Regulations, 2018 and Regulations 22 and 23 of D&P Regulations, 2018, as
applicable.
4.8.4. In the post listing scenario, a reference of the applicable Regulation with regard
to fit and proper (by mentioning the URL/weblink of Regulation 19 and 20 of the
SECC Regulations, 2018; and Regulations 22 and 23 of D&P Regulations,
2018) shall be made part of the contract note.
4.8.5. The listed stock exchange and listed depository and the stock exchange where
the shares are listed shall notify on their websites that the shares of the listed
stock exchange and listed depository shall only be dealt by fit and proper
persons as per Regulation 19 and 20 of SECC Regulations, 2018 and
Regulations 22 and 23 of D&P Regulations, 2018, as applicable.
4.8.6. The MIIs shall submit to SEBI on a quarterly basis an exceptional report
regarding the shareholders who are not fit and proper and action taken thereof
as per the format given below:
Sl. Name of the Nature of Shareholder % Reason for not fit
No. Shareholder (Person resident India/ Holding and proper and
Person resident outside action taken
India) thereof
4.9. Freezing of Voting Rights and Corporate Benefits
4.9.1. Upon breach of the fit and proper criteria; and various threshold limits for
shareholding of MIIs, the DD shall apply ISIN level freeze on the demat
account of the relevant shareholder for the excess shareholding and inform
the respective MII and RTA to disable e-voting for the account holder on
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EoD basis. The DD shall initiate the freezing of corporate benefits, in the
manner described below:
4.9.1.1. With respect to freezing of voting rights, the DD shall inform the MII, RTA
and the other depository about the breach by the shareholders on EoD basis.
The MII in consultation with the DD and RTA shall also disable the e-voting of
the shareholder for the portion of the shareholding in excess of the regulatory
requirement and the MII shall ensure that the shareholder's vote for such
excess shareholding is not considered in the regular voting process.
4.9.1.2. With respect to corporate benefits, the DD shall inform the list of shareholders
whose corporate benefits are to be frozen, to the MII and other depository on
EoD basis. The MII or its RTA shall transfer the corporate benefits (dividend)
of such shareholders on the portion of shareholding in excess of the regulatory
requirement to their Investor Protection Fund (IPF) (for stock exchanges and
depositories) and Settlement Guarantee Fund (SGF) (for CCs).
4.9.2. The divestment of any excess shareholding in a listed MII beyond the specified
limit would be through a special window provided by the stock exchange where
the shares of MII are listed. However, any excess shareholding in an unlisted
MII shall be divested as per the directions given by SEBI on case to case basis.
5. The stock exchange or depository submitting application for listing of its securities
to SEBI shall ensure strict compliance with Chapter VII of SECC Regulations, 2018
and Chapter VIII of D&P Regulations, 2018 respectively.
6. Applicability:
6.1. The provisions of this circular shall come into effect from 90th day from the date
of issuance of the circular.
6.2. Paragraph 2.4 of Chapter 6 of the SEBI Master Circular No.
SEBI/HO/MRD2/PoD-2/CIR/P/2023/171 dated October 16, 2023 for ‘Stock
Exchanges and Clearing Corporations’, paragraph 4.76 of Section 4 of SEBI
Master Circular No. SEBI/HO/MRD/MRD-PoD-2/P/CIR/2023/166 dated October
06, 2023 for ‘Depositories’ and paragraph 15.1.1 (IV) & (V) of Chapter 15 of SEBI
Master Circular No. SEBI/HO/MRD/MRD-PoD-1/P/CIR/2023/136 dated August
04, 2023 for ‘Commodity Derivatives Segment’ shall stand rescinded with effect
from the date of implementation of this circular; and
6.3. SEBI letter dated July 17, 2017 to Depositories and Stock Exchanges on
procedures for ensuring compliance with SECC Regulations, 2018 and D&P
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Regulations, 2018 shall stand rescinded with effect from the date of
implementation of this circular.
7. All MIIs are advised to:
7.1. take necessary steps and put in place necessary systems for implementation of
the above.
7.2. Make necessary amendments to the relevant bye-laws, rules and regulations,
wherever required, for the implementation of the above; and.
7.3. bring the provisions of this circular to the notice of the market participants
(including investors) and disseminate the same on their website
8. This circular is issued in exercise of the powers conferred under Section 11(1) of
the Securities and Exchange Board of India Act 1992 read with Regulation 51 of
the Securities Contracts (Regulation) (Stock Exchanges and Clearing
Corporations) Regulations, 2018, Section 26(3) of the Depositories Act, 1996 and
Regulation 97 of Securities and Exchange Board of India (Depositories and
Participants) Regulations, 2018 to protect the interests of investors in securities
and to promote the development of, and to regulate the securities market.
9. This circular is available on SEBI website at www.sebi.gov.in at “Legal Framework
- Circulars.”
Yours faithfully,
Hruda Ranjan Sahoo
Deputy General Manager
Market Regulation Department
Email: hrsahoo@sebi.gov.in
Ph. No.022-26449586
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