Market regulator Sebi on Wednesday disposed of a show cause notice which was directed to Housing Development & Finance Corporation (HDFC) regarding alleged breaches of stock transfer agent standards.
The watchdog had carried out an inspection of HDFC, which was registered with the regulator as a Class II Registrar to a Share Issuance and Transfer Agent, from September 30 to October 9, 2019, for the period from April 1, 2018 to July 30, 2019.
HDFC has been alleged to have violated certain provisions of regulations and/or standards relating to registration requirements and disclosure requirements relating to registrar agents at an issue and share transfer agents.
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Passing an order on Wednesday, Sebi Adjudication Officer Geetha G said no monetary penalty was warranted in relation to the allegations made in the present case and disposed of the show cause notice which was released in December 2021.
According to the order, among the allegations made in the show cause notice, the (HDFC) notice breached two aspects – relating to the issuance of duplicate shares and deviation from prescribed procedures in the event of transfer of dividends.
“The notice argued that it had taken corrective action following the deficiencies reported by Sebi, including updating the SOP and appointing an external auditor to review cases outside of the sample analyzed by Sebi. .
“Furthermore, the notice has already relinquished its Class II Share Transfer Agent registration to ‘Link Intime India Pvt Ltd’. Thus, after an overall assessment of the allegations and other circumstances, I conclude that the aforementioned non-compliances are not serious enough to warrant the imposition of a monetary penalty,” the order states.
According to Sebi, in the case of the procedures to be followed when issuing duplicate shares, the notice had taken a thoughtful appeal not to insist on the same and conferred discretion on its compliance officer to waive the FIR requirement.
Noting that this is not a case of willful or occasional non-compliance, but a facilitation made to shareholders at the request of the stakeholder relations committee, Sebi said it would ensure that the certificates duplicate shares are not issued to the wrong people.
“It is not out of place to observe that there are instances where investors have encountered difficulty in filing an FIR. Therefore, in my view, a deviation from the strict letter of the law may be considered a minor or technical or procedural violation,” the order said.
Regarding the deviations from the procedures provided for the online transfer of dividends, the contracting officer stated that the RTA has systematically paid out the dividends by the physical mode.
“I also note that the adviser was functioning as an internal RTA. Considering this, I would like to take a lenient attitude and not consider this as serious misconduct on the adviser’s side,” she added.
(Edited by : Jomy Jos Pullokaran)
First post: STI