Sebi Mandates Market Infrastructure Institutions to Resolve Whistleblower Complaints Within 60 Days

The Securities and Exchange Board of India (Sebi) has introduced new guidelines to enhance accountability and governance for stock exchanges and other market infrastructure institutions (MIIs). These guidelines require MIIs to address whistleblower complaints within 60 days. Sebi also urged MIIs, including stock exchanges, clearing corporations, and depositories, to adopt RegTech and SupTech technologies for improved regulatory and supervisory functions.

Representative image

MIIs must now implement systems that allow members or participants, such as stock brokers and depository participants, to submit documents online. This reduces the need for physical paperwork. These systems should also generate alerts and reports to support regulatory goals. Additionally, MIIs are required to disclose key information about their members on their websites, including investor grievances resolved and pending for the last three financial years.

Regulatory Compliance and Transparency

To ensure transparency, any significant regulatory non-compliance by a member must be shared with other MIIs. This aims to maintain accountability across the board. MIIs are also tasked with establishing policies for appointing and monitoring back-office vendors or outsourced agencies. These policies should identify potential risks associated with vendors and outline measures to mitigate them.

Sebi has specified that the audit committee will oversee whistleblower complaints. This committee is responsible for receiving, investigating, and making decisions on these complaints. It must submit a detailed quarterly report to the MII's Governing Board, outlining received complaints, actions taken, and unresolved issues. If a decision cannot be reached on a particular matter, it must escalate the issue to the Governing Board for resolution.

Strengthening Governance Structures

Public Interest Directors (PIDs) are required to meet at least once every six months. All members must attend these meetings, which focus on reviewing compliance with Sebi regulations. They also assess critical areas like operations, regulatory compliance, risk management, and investor grievances. PIDs are tasked with identifying potential conflicts of interest and addressing issues with significant market impacts.

Sebi has directed MIIs to create internal Standard Operating Procedures (SOPs) for disciplinary actions against Key Management Personnel (KMPs). The policy should be approved by the Nomination and Remuneration Committee (NRC) and the Governing Board of the MII. The SOP includes actions like advisory warnings, impact on annual increments or promotions, suspension, and termination.

Reporting Requirements

Compliance Officers must report non-compliance and investor grievance redressal quarterly. These reports should be submitted to Sebi within 45 days after each quarter ends. Additionally, Chief Risk Officers are required to submit half-yearly reports on overall risk management within 90 days of the half-year's end.

Sebi has mandated that MIIs disclose agendas and minutes related to regulatory compliance, risk management, and investor grievances on their websites. This move aims to enhance transparency in their operations.

The new guidelines will take effect from April 1st as per Sebi's circular. These measures are designed to improve governance structures within MIIs while ensuring accountability at all levels.