MUMBAI, June 6: The Registrars Association of India (RAIN) has proposed that the listing agreement of stock exchanges be amended to include a clause that the issuer guarantee payment to the registrar and transfer agent or that the exchange obtain a no-objection certificate from the registrar at the time of acceptance of annual listing fees. These and other measures have been proposed in the light of increasing instances of non-payment of dues by clients. A committee set by RAIN to go into possible solutions has forwarded a report on the issue to the Securities and Exchange Board of India (SEBI). SEBI is already seized of the problem and had sought this report from RAIN some weks ago.

The association has decided on the recommendations keeping in view the investors interests. According to the report, the main concern for the RTA's is the absence of any kind of protection for it. Registrars to the issue are adequately protected by the security deposit which is to be kept by the issuer with the exchange, to be released only after a ``no objection'' is received from all the intermediaries including the RTA.

The committee has suggested that where the RTA is appointed by an issuer, it is made obligatory on the part of the issuer to discharge his responsibilities towards the RTA. Any violation of his obligations under the MOU would make him liable to be penalized by SEBI under the SEBI RTA regulations.

The committee has also suggested that the issuer provide a bank guarantee which can be enforced upon by the RTA for the recovrey of his dues. The other options of making the payments to RTA include opening a revolving Letter of Credit (L/C) in favour of the RTA which will in turn ensure that the payment is made by the bank to the registrars on the specified date. The L/C scheme will provide for a penalty as any other commercial L/C for delay in payment.

Another option suggested by the team is that the security deposit given by the issuer to the regional stock exchange be converted to an interest bearing deposit with a bank or a regulatory authority and it should cover fees payable to the RTA and the annual listing fees. On full completion of the payment and on receiving the NOC from the registrar the bank can make the interest payment directly to the issuer.The issuer should provide an "Investor security & protection deposit" to the regional stock exchange on an yearly basis which would be made slab-wise depending on the number of shareholders to be serviced.

The registrar is required to give a notice of six months for suspending his services or vice versa. The registrar can claim its dues from the SE which will in turn use the deposit amount kept by the issuer. The deposit will reimburse payments of the RTA for this period and at the end of the period the SE can pay off the dues towards listing fees. The issuer should also be banned from making further issues till a ``no due certificate'' is submitted by the RTA.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.