SMS and E-Mail Alerts by Stock Exchanges

Securities and Exchange Board of India
CIRCULAR
CIR/MIRSD/15/2011                                              August 02, 2011
To
All Recognized Stock Exchanges

Dear Sir/Madam, 

Sub: SMS and E-mail alerts to investors by stock exchanges
 
1. SEBI receives complaints from investors against stock brokers which include
alleged unauthorized trading in their accounts. SEBI has taken steps in the past
to address this issue.
2. As an additional measure, it has now been decided in consultation with the
major stock exchanges and market participants that the stock exchanges shall
send details of the transactions to the investors, by the end of trading day,
through SMS and E-mail alerts.  This would be subject to the following
guidelines:
A. Applicability
These guidelines are applicable to equity - cash and derivative - segments
of the stock exchanges.
B. Uploading of mobile number and E-mail address by stock brokers
i. Stock exchanges shall provide a platform to stock brokers to upload the
details of their clients, preferably, in sync with the UCC updation module.
ii. Stock brokers shall upload the details of clients, such as, name, mobile
number, address for correspondence and E-mail address.
iii. Stock brokers shall ensure that the mobile numbers/E-mail addresses of
their employees/sub-brokers/remisiers/authorized persons are not
uploaded on behalf of clients.
iv. Stock Brokers shall ensure that separate mobile number/E-mail address
is uploaded for each client. However, under exceptional circumstances,
the stock broker may, at the specific written request of a client, upload the
same mobile number/E-mail address for more than one client provided
such clients belong to one family. ‘Family’ for this purpose would mean
self, spouse, dependent children and dependent parents. Page 2 of 3
C. Verification by the stock exchanges
After uploading of details by the stock brokers, the stock exchanges shall
take necessary steps to verify the details by any mode as considered
appropriate by them which may include the following:
a. By way of sending SMS and E-mail directly to the investors at the
numbers/E-mail address uploaded by the stock brokers.
b. By way of sending letters to the address of the investors uploaded by the
stock brokers.
D. Sending of alerts by the stock exchanges
Upon receipt of confirmation from the investors, the stock exchanges shall
commence sending the transaction details generated based on investors’
Permanent Account Number, directly to them.
E. Handling of discrepancies, if any.
If any discrepancy is observed by the stock exchanges in the details
uploaded by the stock brokers including non-confirmation by investors,
bounced E-mails, undelivered SMS/letters, etc., the stock exchanges shall
inform the respective stock broker.
F. Meeting out the expenses for providing SMS and E-mail alerts
The stock exchanges may use the amount set aside from the listing fees for
providing services to the investing public, as provided vide SEBI
communication dated SE/10118 dated October 12, 1992, to meet the
expenses for providing this facility.
G. Implementation
The stock exchanges shall put in place necessary infrastructure and
implement the SMS and E-mail alert facility at the earliest and not later than
four months from the date of this circular.
3. Stock exchanges are advised to :
a. issue necessary instructions to bring the provisions of this Circular to the
notice of their constituents  and also disseminate the same on their
websites;
b. make amendments to the relevant bye-laws, rules and regulations for the
implementation of the above, as deemed necessary, in coordination with
other stock exchanges;
c. communicate to SEBI, the status of the implementation of the provisions
of this Circular in the Monthly Development Report to SEBI;
d. develop the monitoring mechanism through the system of half-yearly
internal audit and inspections; and
e. publicize widely the availability of this facility for the awareness of the
investors.    Page 3 of 3
4. This Circular is issued in exercise of powers conferred under Section 11 (1) of
the Securities and Exchange Board of India Act, 1992 to protect the interests of
investors in securities and to promote the development of, and to regulate the
securities market and shall come into effect from the date of this Circular.
 
5. This circular is available on SEBI website at  www.sebi.gov.in under the
categories “Legal Framework” and “Circulars”.
Yours faithfully,
V S Sundaresan
 Chief General Manager
022-26449200
sundaresanvs@sebi.gov.in

Company Secretaries to verify Company Information in Winding up Cases

August 2, 2011
Company Secretaries to verify Company Information in Winding up Cases
Dear Professional Colleagues,

 The Ministry of Corporate Affairs under General Circular no. 54/2011 dated 26th July 2011 had, as a pro-active action in case of winding up petitions provided that in each case of winding up process the Official Liquidator will file an application praying to the Court to direct the management of the company to submit prescribed information duly verified by a chartered accountant.
A representation was made by the Institute to authorise Company Secretary in Practice to verify information prescribed in that circular.We are pleased to inform that the Ministry of Corporate Affairs vide its General Circular No. 58/2011 dated 01.08.2011 has now modified clause (c) of General Circular no. 54/2011 dated 26.07.2011 providing that in each case the Official Liquidator will file an application praying to the Court to direct the management of the company to submit following information duly verified by a Company Secretary in Practice besides other professionals:·       Current addresses of the Directors, Company Secretary and Statutory Auditor of the company;
·       Location and physical details of each immovable asset of the company along with its current valuation;
·       Details of all the debtors and creditors with their complete addresses and occupations;
·       Details of each movable asset of the company along with value;
·       Details of workmen/employees and any amount outstanding to them;
·       Details of all movable and immovable assets held in the personal names of director by providing its location, value, dates of acquisition and nature of right, title and interest therein;
·       Copies of last three years audited balance sheet of the company;
·       Details of location of the registered office of the company.

A copy of the MCA Circular No. 58/2011 dated 01.08.2011 may be downloaded at the link:
http://www.mca.gov.in/Ministry/pdf/Circular_58-2011_01aug2011.pdf

NEWS

Sh. Naved Masood, IAS (UP:77) has taken over as new Secretary in the Ministry of Corporate Affairs here today. Prior to it he was Special Secretary and Financial Advisor, Department of Health and Family Welfare in the Ministry of Health and Family Welfare. Sh. Masood replaces Sh. D.K.Mittal IAS (UP:77) who has been appointed as Secretary Department of Financial Services in the Ministry of Finance.

Master Circular on Prosecutio​n of Directors

Dear friends,


Please find Master Circular on Prosecution of Directors (Master Circular No. 1/2011, Dated the 29th July, 2011).


The question of treating a person as an officer in default by ROCs when prosecutions are launched against a company and its directors for violations under Companies Act, 1956 has come up for examination time and again. The Department has issued various circulars in this regard so far. It may be recollected that the Department vide circular No.42/7/73-CL.II dated 20.9.1973 had clarified that a person appointed as a nominee director, whatever interest he represents or protects is responsible for the proper discharge of his obligations and fiduciary responsibilities under the statute in the similar manner as an ordinary directors. However, in the same circular, it was further clarified that nominees of institutions set up under Acts having non-obstante clauses can enjoy immunity from prosecutions.
2. In Departmental circular No.6/98 dated 12.11.1998, it was clarified that where penal provisions provide for “punishment of officers in default”, prosecutions should be filed primarily against managing director(s)/ whole time director(s)/manager(s) and the company secretary, if any. It was also clarified that only in those cases where the above mentioned managerial personnel are not available in any company; prosecutions should be against ordinary directors. In the same circular, it was also clarified that there are provisions in the Act which though do not use the expression “officers who are in default” for fastening liabilities in case of their contraventions, yet the persons against whom the proceedings can be initiated is specified. In such cases, the persons expressly specified in the relevant provisions of the Act should alone be prosecuted.
3. It has come to the notice of the Department that in spite of various rulings available on the question of “officers in default” who can be held liable for violations of a particular provision under the Companies Act, the ROCs are arraying all the directors of the company for the violations without differentiating between officer in default and or others.
4.         It is noticed that penal actions are also initiated against certain Directors who are not charge with the responsibility, particularly in following cases: –
(a)  For listed companies Securities and Exchange Board of India (SEBI) requires nomination of certain Directors designated as Independent Directors.
(b)  For public sector undertakings, respective Government nominates Directors on behalf of the respective Government.
(c)  Various Public Sector Financial Institutions, Financial Institutions and Banks having participation in equity of a Company also nominate Directors to the Board of such companies.
(d)  Directors nominated by the Government u/s 408 of the Companies Act, 1956.
In super session of all earlier circulars, it is clarified that Registrar of Companies should take extra care in examining the cases where above Directors are also identified as Officer in default. No such Director as indicated above shall be held liable for any act of omission or commission by the company or by any officer of the company which constitute a breach or violation of any provision of the Companies Act, 1956, and which occurred without his knowledge attributable through Board process and without his consent or connivance or where he has acted diligently in the Board process. The Board process includes meeting of any committee of the Board and any information which the Director was authorized to receive as Director of the Board as per the decision of the Board. All the Regional Directors are advised to direct Inspecting Officers also to examine the Board’s minutes of the company to arrive at a conclusion if Independent director is also responsible for any violation of the provisions of Companies Act, 1956.
5. It is further clarified that before taking penal action under the Companies Act, 1956 against the Directors the following compliances should be verified by Registrar of Companies: -
(a)  A director resigns and the company does not file Form 32 as required in terms of Section 302(2) of the Act. In case, the director concerned has informed/endorsed a copy of his resignation to the Registrar of Companies, the Registrar should enquire into such cases and try to find out whether such director has actually resigned or not.
(b)  In case the status of a director, i.e. whether he is a nominee director or not, is not reflected in the Annual Return or other documents of the company, available with Registrar, the same should be cross checked with the Annual Report filed by the company;
(c) The timing of the commission of offence is also material to identify the director’s responsibility; and Form 1AB should also be checked in case any person has been charged by the Board under Section 5(f) with the responsibility of complying with some particular provision or in case any director has been specified by the Board under Section 5(g) of the Act.
(d) Special Directors appointed by BIFR under section 16 (6)(b) of SICA 1985, shall not incur any obligation or liability for anything done or omitted to be done in good faith and in discharge of duties. Hence they shall be excluded in the list of officers in default
6. For default u/s 209(5), 209(6), 211 and 212 of the Act, the following persons shall be the ‘officers in default for the purpose of prosecution under these provisions:-
(a)  Where there is a Managing Director or Manager, the Managing Director or the Manager as the case may be and in addition, the Company Secretary appointed u/s 383A or the person who has been charged with work of maintenance and preparation of Annual Accounts in compliance with aforesaid provisions.
(b)  Where there is no Managing Director or Manager, every director and the Company Secretary appointed u/s 383A of the Act.
(c)      Any persons amongst officers and employees other than Managing Director/Manager/Directors who has been charged by the Managing Director/Manger or Board of Directors with specific responsibility of complying with aforesaid provisions, in addition to Managing Director/Manager/Board of Directors as the case may be.
(d)          Directors including Non-Executive Directors, officers and employees not connected with responsibility with the above provisions should not be arrayed as delinquent directors.
(e) While considering the non-executive directors for including in the list of officers in default for a particular violation of the Companies Act, it should be examined whether the violation has taken place with his knowledge attributable through board process, with his consent or connivance and whether he acted diligently or not.
(f) Where prosecution is required to be filed against any Government company, its directors/officers and Member of Parliament and Member of Legislator under the Companies Act, 1956, Registrar of Companies should seek prior authorization of Central Government in terms of Section 621 of the Act
7. There should be proper application of mind on the part of Registrar of Companies in deciding whether a person to be implicated is an ‘officer in default’ by examining the Annual Return, Form 32(s) and DIN-3 database available in the Registry. The guidelines issued herein above should be applied and wrongful prosecution should be avoided. Wherever the Registrar of Companies has doubt as to whether director/officer can be held liable after applying the above parameters, they should refer to Regional Director, who shall guide Registrar of Companies in the matter.
8. All the Regional Directors are required to ensure that such cases are reviewed, based on these parameters and a report must be sent by each Regional Director with specific recommendation in case the proceedings are proposed to be discontinued.
This master circular consolidates circular No.2/2003 dated 7.7.2003, No.08/2011 dated 25.3.2011, No.1/88/2010-CL.II dated 18.4.2011 and 47/2011 dated 14.7.2011 respectively.