Section 17A of The Securities Contracts (Regulation) Act, 1956
1[17A. Public issue and listing of securities referred to in sub-clause (ie) of clause (h) of section 2.--(1) Without prejudice to the provisions contained in this Act or any other law for the time being in force, no securities of the nature referred to in sub-clause (ie) of clause (h) of section 2 shall be offered to the public or listed on any recognised stock exchange unless the issuer fulfils such eligibility criteria and complies with such other requirements as may be specified by regulations made by the Securities and Exchange Board of India.
- (2)Every issuer referred to in sub-clause (ie) of clause (h) of section 2 intending to offer the certificates or instruments referred therein to the public shall make an application, before issuing the offer document to the public, to one or more recognised stock exchanges for permission for such certificates or instruments to be listed on the stock exchange or each such stock exchange.
- (3)Where the permission applied for under sub-section (2) for listing has not been granted or refused by the recognised stock exchanges or any of them, the issuer shall forthwith repay all moneys, if any, received from applicants in pursuance of the offer document, and if any such money is not repaid within eight days after the issuer becomes liable to repay it, the issuer and every director or trustee thereof, as the case may be, who is in default shall, on and from the expiry of the eighth day, be jointly and severally liable to repay that money with interest at the rate of fifteen per cent. per annum. Explanation.--In reckoning the eighth day after another day, any intervening day which is a public holiday under the Negotiable Instruments Act, 1881(26 of 1881), shall be disregarded, and if the eighth day (as so reckoned) is itself such a public holiday, there shall for the said purposes be substituted the first day thereafter which is not a holiday.
- (4)All the provisions of this Act relating to listing of securities of a public company on a recognised stock exchange shall, mutatis mutandis, apply to the listing of the securities of the nature referred to in sub-clause (ie) of clause (h) of section 2 by the issuer, being a special purpose distinct entity.]
Summary
- It regulates the public offering and listing of securitised debt instruments, which are certificates representing beneficial interest in debt or receivables like mortgage debt.
- Issuers must meet specific eligibility criteria and follow the regulations made by the Securities and Exchange Board of India.
- Every issuer must apply to one or more recognised stock exchanges for listing permission before releasing the offer document to the public.
- If listing permission is refused or not granted, the issuer must immediately return all money received from applicants.
- If repayment is delayed beyond eight days, the issuer and its defaulting directors or trustees are jointly and severally liable to pay fifteen percent interest per annum.
- Public holidays under the Negotiable Instruments Act, 1881, are disregarded when counting the eight-day repayment period.
Practical examples
FAQ
1. What types of securities are governed under Section 17A?
It governs certificates or instruments issued by a special purpose distinct entity, representing beneficial interest in debt or receivables, including mortgage debt, assigned to the entity.
2. When must an issuer apply for listing permission under Section 17A?
The issuer must apply to one or more recognised stock exchanges before issuing the offer document to the public.
3. What is the penalty for delayed refunds under Section 17A?
If money is not refunded within eight days after the issuer becomes liable to repay, the issuer and defaulting directors or trustees must pay interest at fifteen percent per annum.
4. How are public holidays handled when calculating the eight-day refund period under Section 17A?
Public holidays under the Negotiable Instruments Act, 1881, are excluded from the eight-day count, and if the eighth day is a holiday, the next business day is used.
Test yourself
Q1.Under Section 17A of The Securities Contracts (Regulation) Act, 1956, when must a special purpose distinct entity apply for listing of its securitised debt instruments on a recognised stock exchange?
Q2.Under Section 17A of The Securities Contracts (Regulation) Act, 1956, if a special purpose distinct entity is refused listing permission by a recognised stock exchange, what is the interest rate applicable on delayed refunds after the eight-day grace period?
Q3.Under Section 17A of The Securities Contracts (Regulation) Act, 1956, how must public holidays be treated when calculating the eight-day period for refunding investor money?
Q4.Under Section 17A of The Securities Contracts (Regulation) Act, 1956, which types of securities, defined under Section 2(h)(ie) of the Act, are subject to these listing rules?