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A Stock Exchange has always played a pivotal role in defining standards and disclosure agreements for listed companies through corporate governance. They monitor compliance and help in the evaluation of risk management of its listed companies. SEBI performs the above functions in India. The SEC and the twin governing authorities FCA and PRA perform similar functions in USA and UK respectively.

Clause 49 and the Indian Scenario:

The Companies Act (enacted on August 30, 2013) provides for the majority of corporate governance norms for all companies. With the objective to make these norms more effective, SEBI issued the revised Clause 49 with effect from October 1, 2014. Clause 49 covers the rights of its shareholders, stakeholders, duties and responsibilities of the Board. It covers the code of conduct and the Whistleblower’s Policy among other governing objectives. Takeaways in the risk management and compliance context are as follows:

  • Risk Management:

This is applicable to only the top 100 companies by market cap as at the close of the previous financial year. Under this head, the companies must inform the Board about the risk management assessment and minimization procedures. The Board should constitute a Risk Management Committee that would delegate its responsibilities as and when it may deem fit.

  • Compliance:

The company is required to obtain a certificate regarding compliance of Corporate Governance as given in the clause. Moreover, it should supplement the certificate with the shareholder’s report which is to be sent annually to the shareholders of the company

Listing Agreement

  • The UK Governance Code, Compliance and the Listing Process:

Firstly, the UK Corporate Governance Code is part of the UK company law that regulates the companies listed on the London Stock Exchange. The contents of the code include sections on Leadership, Effectiveness, Accountability and Remuneration among others. Also, the compliance rules (procedures) cater to the disciplinary process used by the Exchange.

If the exchanges realize that there has been a breach in the rule, then they would take strict disciplinary action against the concerned individual/firm. This may be through a fixed penalty, warning or the exchange may impose a fixed penalty, issue a warning discussion with either an Executive Panel or a Disciplinary Committee. The rules detail the process applied to each of the above sanctions, including the appeals process.

“Listing” involves filing an application to the FCA for registering the company’s securities on the Official List. One should give an application to a recognized investment exchange (“RIE”), such as the Main Market of the London Stock Exchange, for admission of such securities for trading.

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Listing Segments:

There are two segments, Premium(which is the “premium” brand of listing with more compliance with rules) and Standard within which a company can choose to list. The diagram explains the listing categories :

UK Listing Regime

The SEC and Compliance:


The SEC protects investors; maintains fair, orderly, and efficient markets; and facilitates capital formation.

A few takeaways for Compliance under SEC are as follows:

  • Firstly, preparing and reviewing proxy materials and annual, quarterly and other reports filed with the SEC
  • Secondly, creating equity incentive plans, such as stock option, stock appreciation and restricted stock plans, and other benefit plans. Creating dividend reinvestment and direct stock purchase programs
  • Thirdly, the preparation and review of committee charters, codes of ethics, guidelines and standards
  • Last but not the least, advising clients on the latest developments in corporate governance


SEBI along with its counterparts- SEC, FCA and PRA have been able to regulate and ensure corporate governance. Though there have been corporate failures like Kingfisher, Enron and MC Rover Group, stock exchanges have now taken precautionary measures.

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