What Is Additional Surveillance Measure (ASM) or Graded Surveillance Mechanism (GSM):
It is introduced into stock market as a guard for small investor. For this SEBI or Exchange is taking sevral surveillance measures such as reduction in price band, periodic call auction and transfer of securities to Trade to Trade category from time to time.
The main objective of these measures is to
- Alert and advise investors to be extra cautious while dealing in these securities and
- Advise market participants to carry out necessary due diligence while dealing in these securities.
Stages of ASM or GSM:
Currently, there are 6 stages defined under GSM framework viz. From Stage I to Stage VI. Surveillance action has been defined for each stage. Once the security goes into a particular stage, it shall attract the corresponding surveillance action.
How bad ASM OR GSM?
Not necessarily. There will be a review process by Sebi twice a year where the shares of companies will be moved in or out of GSM. Also, a quarterly review of GSM stages will be done where qualified companies may be moved back from a higher to lower stage.
What are the points small investors should keep in mind about the Additional Surveillance Measure?
The only challenge for the small investors is that these announcements are often made at very short notice and implemented from the next day itself thus giving those who have already entered the stock less than adequate time to exit it. Of course, there is also potentially another risk. For example, even if time is given, the stock might crash next day on the news, triggering the lower price circuit and leaving no exit opportunity.
Can Company Challenge GSM Tag?
Yes, the companies challenge Sebi or stock exchanges, the Securities Appellate Tribunal or the high courts for relief. In fact the Securities Appellate Tribunal on 11 Aug. 2017 put hold SEBI directive against J Kumar Infra and Prakash Industries. The exchanges have removed the trading restrictions against them.
You can Find more details in attached PDF for FAQ