In a mammoth clean-up exercise, markets regulator Sebi is planning to push for delisting of over 4,200 listed companies whose shares are not being traded, and promoters refusing to give exit opportunity to investors would face strict penal actions.

These include over 1,200 companies whose shares are listed on national bourses BSE and NSE but where trading has been suspended for various non-compliance issues for over seven years. Besides, there are over 3,000 companies listed on various regional stock exchanges that have become defunct, Sebi Chairman U K Sinha said on Wednesday.

He also warned of strong action against the auditors who close their eyes to the lapses in the financial accounts of listed firms.

"So far, we have had a hands-off approach on auditors, but we will take action if something serious comes to our notice. Auditors cannot go scot-free if they have been certifying the books for years without pointing finger at the lapses," Mr Sinha said.

The exercise for over 4,200 listed firms would be completed this year. Such exercises would be taken up going forward to clean up the market from what the Sebi chief described as "a source of nuisance".

In an interaction here, Mr Sinha said delisting of these companies is one of the key focus areas for the regulator in the current fiscal.

"We are going to reduce the number of listed companies. We have already reduced the number of stock exchanges by successfully closing several defunct or non-functional regional exchanges. They were centres of risk and there were series of litigations but we have won all of them.

"Now our target is to reduce the number of listed companies where no or little trading is taking place," he said, adding that it was not something to be happy about to have maximum number of listed companies if there was no trading activity happening.

"There are two sub-sets -- first there are over 3,000 companies exclusively listed on regional exchanges and then the second is the list of companies where trading has been suspended for a long time. To start with, we have decided on a seven-year threshold and there are over 1,200 such listed companies together on BSE and NSE," he said.

"We will do it this year," he said.

Promoters would be asked to make exit offers for the shareholders of these companies, while those willing to resume normal trading on main exchanges would be allowed to do so after meeting regulatory requirements.

"If promoters do not give exit offer, we will take action against them. First, we will debar them from raising funds from the markets. There will be action against the company, the promoters and even directors," the Sebi chief said.

"They must clean up. If promoters do not cooperate, they will face the music. Sebi is a substantially empowered regulator and law allows us to take action against them," he said, adding that a fair value will be decided by a third party for the exit offer.

Mr Sinha further said that around 500 such listed companies have decided to come on the main exchanges.

Among other measures, Mr Sinha said Sebi also plans to overhaul its arbitration mechanism this year.

"Sebi will now play some direct role including in selecting the arbitrator and in deciding the award. So far we have had a hands-off approach. The number of arbitration centres will also be doubled this year from 8 to 16," he said.

Mr Sinha said Sebi has given itself targets for the current fiscal and these also include allowing new products in commodities market, though allowing new participants like banks and insurers may take some time due to involvement of other regulators.

"Up to last year, we had framed a number of regulations and now our focus will be on ensuring their implementation and monitoring of compliance" including on enhanced listing and disclosure norms.

"Sebi team will visit stock exchanges to see their preparedness and risk management systems to ensure monitoring of listing norms. Besides, simplification of disclosure requirements is also on the agenda for the benefit of corporates.

"Besides, monitoring of compliance by intermediaries including brokers is also high on the agenda. There have been some cases where brokers have run away with money of the clients. While Sebi has taken action against them, it also needs to ensure that such incidents do not happen again," he added.#casansaar (PTI - NDTV Profit)