Investors use RTI for delisted firms

[karira]

The echoes of the delisting of 1,000 companies by the Bombay Stock Exchange (BSE) in 2004 have not died down and in January, the Central Information Commissioner will be hearing the second appeal under the Right to Information Act regarding inadequate information given by the BSE to the Midas Touch Investors Association on this issue.

According to the association secretary, Virendra Jain, over one million investors have lost their money because these 1,000 companies have been delisted. They have not been informed of their situation either before or after the delisting process. This says, Mr Jain has dealt a severe blow to investor’s confidence.

Why the hurry?

Of the 1,000 companies, around 400 were delisted as they were not found at their registered offices as per the records. Mr Jain says that the delisting of these companies even while the joint coordination monitoring committee (CMC) was looking into the vanishing companies was against investor interest.

Where was the hurry to delist them, he asks.

About 800 first information reports (FIRs) have already been filed with the police against the promoters and directors of 75 companies so the BSE should not have been in a hurry to delist them.

Information deficieny

The Midas Touch Investors Association had under the Right to Information Act asked the BSE for information on the orders passed by it in the delisting of 1,000 companies, the names of the person who passed the orders and the dates of such orders, and the grounds on which they were delisted.

A shareholder/investor cannot appeal against the delisting order if he does not have the details of the order. Unless investors have the details of the full procedure followed for delisting, they would not know if the procedure has been adhered to or the decision was taken arbitrarily.

The other information asked for under the RTI was, "what action did the Bombay Stock Exchange and Sebi take before and after the delisting to protect the interests of the investors, who are the small, minority shareholders in these companies."

The answers that the Association received were not satisfactory and were incomplete so they wrote back without any luck. Sebi merely passed on what information was given to it by the BSE.


Business News

[karira]

As per the above news item, BSE gave information under the RTI Act.

However, I thought that the case for BSE and other Stock Exchanges, to be declared as PA's under the RTI Act, was still pending before the Delhi High Court.

Can some member update, whether the case is settled ?

[karira]

As reported by Olga Tellis on howrah.org on 10 June 2008:
BSE’s faulty act - Howrah News Service - Latest news and headlines on Howrah and West Bengal

BSE’s faulty act

One of the continuing concerns of lakhs of investors is the delisting of 992 companies by the Bombay Stock Exchange in 2004. Thou-sands of investors who had subscribed to initial public offers during the stock market boom in the early and mid-1990s were left high and dry when over 1,000 companies that collected money through IPOs vanished from the scene after taking the investors’ money. To add to their troubles, 992 companies were delisted by the BSE after Midas Touch Investors Association (MTIA) filed a public interest litigation demanding action against these companies.

Investors victimised

The MTIA’s Investor Helpline has received over 500 grievances relating to 150 delisted companies. At the time of delisting, numerous companies were working and had tangible assets, but the BSE action has resulted in a loss to nearly 50 lakh investors as their shares have been reduced to waste paper. The whereabouts of over 400 companies were not known to Bombay Stock Exchange and were under the scanner of the joint coordination and monitoring committee for inclusion in "Vanishing Companies".

So Midas moved an application before the Securities and Exchange Board of India under the Right to Information Act in 2007, asking for information on what process was followed when delisting the 992 companies.

When Sebi asked the BSE about this, it forwarded the public notices it issued to the companies that were delisted. Midas said that this information was incomplete and went in appeal to the Central Information Comm-issioner (CIC) seeking delisting orders.

Guidelines flouted

According to the Sebi guidelines for compulsory delisting, the exchange has to follow a procedure that includes forming a committee and then according to the BSE’s own byelaws the board has to pass a special resolution for delisting. All these documents should have been made available to Sebi, if the procedures were followed.

However the Sebi representative made the shocking disclosure before the CIC that it could not show the orders, as the BSE did not pass any orders.

Wealth destruction

Mr Virendra Jain, honorary secretary of Midas, said Sebi’s guidelines are made to protect investors’ interests. The investors have not only been left in the dark but they have not got a paise of their investment back.

Mr Jain has written to the finance minister demanding the revocation of the delisting for the following reasons:

Delisting was carried out without complying with the norms so there should be an inquiry in the matter.

During delisting, these companies were working and had tangible assets. But the BSE action has resulted in a loss to nearly 50 lakh investors.

The delisting was carried out for non-compliance with the terms of Listing Agreement. Though Sebi had directed all the stock exchanges to invoke penal provisions of the Securities Contract (Regulation) Act for such violation, instead of invoking these provisions, the BSE, for reasons best known to it, chose to delist the companies.

In the instant case, it means exonerating violation of laws and rewarding wealth destruction.

[sidmis]

BSE not followed delisting rules, alleges forum

As reported byGaurav Pai 17 Jun, 2008, ET Bureau

MUMBAI: A query filed under the Right to Information (RTI) Act has alleged that the Bombay Stock Exchange (BSE) may not have followed full protocol (laid down by Sebi) while delisting close to a thousand companies in 2004.

BSE had delisted these companies for their failure to comply with the exchange’s listing requirements. Yet the query maintains the exchange itself may have been in violation of Sebi regulations. Investor Helpline, a portal sponsored by the Investor Education & Protection Fund, ministry of corporate affairs and the Delhi-based Midas Touch Investors Association, have filed a query with Sebi, seeking information on the delisting procedure followed by the exchange.

As stock exchanges do not come under the purview of the RTI Act, the investor association has sought to collate the data via, markets regulator, Sebi. BSE is understood to have responded to the regulator on the query.

A senior official from the association claims that BSE may not have issued proper orders of delisting in the process, or may have failed to issue advertisements in prominent newspapers (as laid down by Sebi). This resulted in investors being deprived of an exit option before the companies were actually delisted. BSE’s official spokesperson declined to comment on these allegations.

“When we asked the exchange (through Sebi) for documents about the procedure followed in delisting, we were only given copies of media releases, but not full orders of delisting or evidence of advertisements,” says Virendra Jain, director of Midas Touch Investors Association. “This raises doubt over whether the entire procedure laid down by Sebi was adhered to,” he adds. ET sent a detailed questionnaire to BSE about the allegations but received no response to the same.

The association has now filed a fresh RTI application asking for at least minutes of the delisting proceedings. It is also likely to seek MoF intervention in the matter.

The almost 1,000 delisted companies were mostly smallcap companies which did not comply with the routine stock exchange requirements like filing results, informing about corporate actions, holding AGMs and so on.

As per Sebi Delisting guidelines, 2003, there should be five members, who should sanction and ratify the delisting order. Also, post issuing a showcause notice to a company, an exchange has to put up “two ads, at least one in an English daily with national circulation.”

BSE not followed delisting rules, alleges forum- Market News-Stocks-Markets-The Economic Times