Market regulator Sebi on Wednesday disposed of a Offer Reason Notice issued to the Housing Development and Finance Corporation (HDFC) in connection with alleged violations of stock transfer agent rules.
The regulator conducted an examination of the HDFC, which was registered with the regulator as a Class II Registrar to Share Issuing and Transfer Agent, from September 30 to October 9, 2019, for the period from April 1, 2018 to July 30, 2019.
The HDFC was alleged to have violated certain provisions of the Listing and Disclosure Obligations Regulations and/or the rules relating to registrants to stock transfer and issuance agents.
By issuing an injunction on Wednesday, Sibi’s adjudicating officer, Geetha Ji, said there was no justifiable financial penalty in relation to the allegations made in the current case and disposed of the reason for show notice issued in December 2021.
According to the order, among the allegations in the Reason for Offer Notice, the Notice (HDFC) was a violation of two aspects – related to the issue of duplicate shares and deviation from the prescribed procedures in the event of a dividend transfer.
The notice provided that it had taken corrective measures in accordance with the deficiencies indicated by Sebi, including updating the SOP and appointing an external auditor to examine the out-of-sample cases analyzed by Sebi.
“Furthermore, the notice has already handed over the Class II Share Transfer Agent’s registration to ‘Link Intime India Pvt Ltd.’. Consequently, in a thorough evaluation of the allegations and other circumstances, I have found that the above non-compliance is not serious enough to warrant the imposition of a fine.” .
According to Sebi, in the event of procedures to be followed in the issue of duplicate shares, the notice made a considered call not to insist on this and to give the compliance officer the discretion to waive the FIR requirement.
Noting that this is not a case of intentional or accidental non-compliance but a facilitation made to shareholders at the request of the Stakeholder Relations Committee, Sebi said this will ensure that duplicate stock certificates are not issued to the wrong people.
“It is not inappropriate to note that there have been cases where investors have encountered difficulties in filing an FIR. Therefore, in my opinion, a deviation from the strict text of the law can be considered a technical or procedural violation,” the order said.
Regarding the deviation from following the established procedures regarding the transfer of profits online, the dismissal officer said that the RTA has systematically disbursed the profits through the material situation. “I also note that the notice was serving as the internal RTA.
In light of this, I would take a lenient view and not consider it a serious misstep on the part of the notice.”
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