Leading bourses BSE and NSE today listed out more than 800 companies under graded surveillance measures framework to check any abnormal rise in stock price not commensurate with these firms’ financial health.
Action on companies shortlisted under the framework will be initiated from March 14, 2017.
Under graded surveillance measures (GSM), which include restricting trades of the companies’ concerned, will be in addition to the existing surveillance steps.
In separate circulars, BSE said it has listed out 774 companies and NSE has shortlisted 43 firms.
The exchanges have advised trading members to exercise additional due diligence while trading in these securities either on own account or on behalf of their clients.
The list of securities put under GSM will be periodically reviewed and published by the exchanges in a coordinated manner.
Last week, the exchnages had put in place graded surveillance measures to check any abnormal rise in share price not commensurate with the company’s financial health.
The measures will be in place for “securities which witness an abnormal price rise not commensurate with financial health and fundamentals like earnings, book value, fixed assets, net worth, P/E multiple…”.
Among the steps being proposed under GSM are placing such securities in trade to trade category, requiring the entities to deposit an additional amount as surveillance deposit which can be retained for an extended period and freezing of price on the upper side of trading in shares.
Making such securities available for trading just once in a week or month will also be looked at.
According to the exchanges, these actions will be triggered on the basis of certain criteria and “made effective with a very short notice”.
In recent times, there have been instances where shares of certain companies have seen a steep surge in prices despite no major trigger.
The members trading in the identified securities either on their own account or on behalf of clients shall be kept under close scrutiny by the exchange, and any misconduct would be viewed seriously.
These surveillance actions are without prejudice to the right of exchanges and Sebi to take any other surveillance measures on a case to case basis or holistically, depending on the situation and circumstances.
Additional Surveillance Deposit (ASD) should be paid only in the form of cash and retained till review of the graded surveillance stages.
This ASD would not be refunded or adjusted even if securities purchased are sold off at the later stage within a quarter and also would not be considered for giving further exposure.
The amount will be over and above the existing margins or deposits levied by the exchanges on transactions in such companies and interest free. In case of default in payment of ASD, penal actions will be initiated.