4.1 The Committee was informed that the norms with regard to scrutiny of offer documents before a company makes a formal application for listing, as applied by the Stock Exchanges were not uniform and that different Stock Exchanges follow varying norms. The BSE is reported to have a system of a detailed scrutiny of the offer documents in the light of certain norms stipulated by it. It also exercises its discretion in deciding whether or not to permit the listing of securities. This scrutiny is done on the basis of draft offer documents submitted to the BSE to enable the company to know in advance whether the BSE would grant grant or not the permission for listing of the securities proposed to be issued and listed, so that the company can state in the prospectus that the securities would be listed on the BSE, only if that is confirmed by the Exchange on the basis of such scrutiny. The BSE has sought to amend its bye-laws for this purpose and it has submitted a proposal to the SEBI in this regard. The Committee was also informed that some of the other Exchanges also have such system in operation. The Committee is of the view that this system should be made mandatory for all the Stock Exchanges. Every company intending to list its securities on a recognised Stock Exchange should be enjoined to submit to the concerned Exchange, a draft offer document and obtain from it a prior written approval before the final prospectus is filed with the Registrar of Companies. This requirement should be in addition to the one of the vetting of offer documents by SEBI. The listing norms to be applied by the Stock Exchanges for the purpose should be disclosed and well publicised so that there is a desired transparency in the matter.

4.2 The Committee felt that there should be some minimum basic listing norms to be applicable to all the recognised Stock Exchanges with a limited freedom to them to lay down additional norms to suit their requirements. This would, of course, give rise to a situation where a company which does not fulfill the pre-listing scrutiny norms of the Stock Exchange (which will be the Regional Stock Exchange for the company), the company would not be able to get its securities listed at any other Stock Exchange even though it can comply with the pre-listing norms of the other Stock Exchanges. In order to overcome this situation, the Committee (one member dissenting - Note of Dissent is enclosed) is of the view that Circular No. F14(2)/SE/85 dated 23 September, 1985, issued by the Ministry of Finance, Government of India, needs to be amended so as to dispense with compulsory listing of securities on Regional Stock

Exchanges. The Committee is of the opinion that the concept of Regional Stock Exchange is slowly losing significance in view of modern technological innovations being resorted to by the Stock Exchanges, especially the major ones, due to which all the Stock Exchanges in the country are getting connected with each other, to the benefit of the members and the investors. The Committee feels that, in the present environment the Stock Exchanges should be free to operate competitively and the companies should be free to chose any Exchange/s for listing of their securities. In the Committee’s view, in the liberalised scenario there is nothing wrong in letting the Stock Exchanges get exposed to competition.

The Committee, therefore, recommends that:

The basic minimum norms for listing of securities on any recognised Stock Exchange should be uniform for all the Exchanges and the Stock Exchanges be permitted to prescribe additional norms over and above the minimum norms. These norms should be a part of the bye-laws of the Stock Exchanges. Both the sets of the norms should be clearly spelt out and publicised.

The Committee (one member dissenting - Note of Dissent is enclosed) also recommends that :

The requirement of the listing of securities on the regional Stock Exchanges as required in terms of Circular No. F14(2)/SE/85 dated 23 September, 1985, issued by the Ministry of Finance, Government of India, should be done away with.