Stock exchanges freeze more promoter demat accounts for non-compliance

Business Standard

4 hours ago

The number of companies with promoters whose demat accounts were frozen by the stock exchanges due to non-compliance increased over the past year.
The BSE froze promoter demat accounts in 457 companies, according to data from the Securities and Exchange Board of India's (Sebi's) 2024-25 annual report released on August 12.
These numbers are broadly higher than those of the previous year, although lower than in 2022-23.
Of the 5,452 companies listed on the BSE, 4,463 were traded as of March 2025. The frozen promoters accounted for more than a tenth of these traded entities. The BSE also has the largest number of listed companies, including many older legacy firms with limited operations.
The National Stock Exchange (NSE), which has 2,720 listed companies, froze the demat accounts of 73 firms. The Metropolitan Stock Exchange of India (MSEI) froze 36 of its 263 listed companies. The BSE is the oldest of the three exchanges, followed by the NSE and then the MSEI.
'Sebi issued a standard operating procedure (SOP) outlining the punitive measures to be taken by stock exchanges in case listed entities are non-compliant with the provisions of Sebi (Listing Obligations and Disclosure Requirements) Regulations, 2015. The SOP encourages a better compliance culture by laying out a well-defined procedure for stock exchanges to follow while levying penalties and taking subsequent actions. In the past two years, some listed companies have defaulted, for which various actions have been taken by the exchanges under the SOP circular,' said the annual report.
Freezing promoter demat accounts is not the first step taken when exchanges detect non-compliance, said Company Secretary Gaurav Pingle. Exchanges usually impose fines initially, and only after continued violations despite warnings are accounts frozen. This suggests that promoters remain on the wrong side of listing requirements for some time. Action does not follow at the very first instance of a regulatory slip-up, he said. 'It is one of the steps taken at the end,' Pingle added.
A July 2023 Sebi circular specified fines ranging from ₹1,000 per day (for lapses such as failing to appoint a company secretary) to ₹50,000 per day (for not obtaining in-principle stock exchange approval before issuing securities). Each stock exchange was to review compliance, issue a notice to the company within 30 days of the due date of submission, and then send a notice to the promoter.
'The recognised stock exchange(s) concerned shall, upon expiry of the stipulated periods indicated in the aforementioned notices, forthwith intimate the depositories to freeze the entire shareholding of the promoter(s) in such entity, as well as all other securities held in the demat accounts,' the circular said.
Earlier, authorities suspended companies, said a person associated with an investor association who has worked with authorities on such issues. That left non-promoter shareholders trapped with no exit for their investments. An SOP removes such discretion, he observed.
The fines collected for non-compliance across the three exchanges amounted to ₹67.2 crore in 2024-25, lower than ₹103.5 crore in 2023-24. The three bourses had collected ₹90 crore in 2022-23.