SEBI panel on governance of stock exchanges

SEBI panel on governance of stock exchanges

What is the news :

• Capital markets regulator SEBI on Monday constituted a committee for reviewing and making recommendations for further strengthening of governance norms at stock exchanges and other market infrastructure institutions (MIIs).
• The development comes in the backdrop of alleged corporate governance lapses at NSE, with several issues coming to the fore following a SEBI order that disclosed existence of a ‘Himalayan yogi’ who influenced the decisions of the exchange’s former MD and CEO Chitra Ramkrishna.
• Apart from this, Ramkrishna had shared certain internal confidential information, including financial and business plans of NSE, dividend scenario, financial results with the yogi and even consulted him over the performance appraisals of the exchange’s employees.

About the committee:

• The six-member committee will be chaired by G Mahalingam, former whole-time member of SEBI, according to a statement.
• The other members of the committee are — MD and CEOs of stock exchanges NSE and BSE, and depositories — NSDL and CDSL; J N Gupta, MD of Stakeholders Empowerment Services; Aarti Nihalani, Partner, Oliver Wyman; Sandip Bhagat, Partner, S&R Associates; and Uttam Bagri, former chairman, BSE Brokers Forum.
• The terms of reference of the committee include making recommendations on measures for strengthening the role played by governing board and committees of MIIs.
• In addition, the panel will review the requirements related to appointment and role and responsibility of directors on the board and Key Managerial Persons (KMPs), and developing effective metrics for monitoring various aspects of the functioning of MIIs and KMPs.
• Also, the committee will enhance accountability and transparency, review the policy on safekeeping and sharing of information held by MIIs and revisit the code of conduct and code of ethics for directors of the governing board and KMPs.

About SEBI:

• The Securities and Exchange Board of India (SEBI) is the regulatory body for securities and commodity market in Indiaunder the ownership of Ministry of Finance , Government of India
• It was established on 12 April 1988 and given Statutory Powers on 30 January 1992 through the SEBI Act, 1992
• Headquarters – Mumbai
• Chairman – Madhabi Puri Buch ( recently appointed)

Functions of SEBI:

The main primary three functions are-

• Protective Function
• Regulatory Function
• Development Function

1. Protective Functions

As the name suggests, these functions are performed by SEBI to protect the interest of investors and other financial participants.

It includes-

• Checking price rigging
• Prevent insider trading
• Promote fair practices
• Create awareness among investors
• Prohibit fraudulent and unfair trade practices

2. Regulatory Functions

These functions are basically performed to keep a check on the functioning of the business in the financial markets.

These functions include-

• Designing guidelines and code of conduct for the proper functioning of financial intermediaries and corporate.
• Regulation of takeover of companies
• Conducting inquiries and audit of exchanges
• Registration of brokers, sub-brokers, merchant bankers etc.
• Levying of fees
• Performing and exercising powers
• Register and regulate credit rating agency

3. Development Functions

This regulatory authority performs certain development functions also that include but they are not limited to-

• Imparting training to intermediaries
• Promotion of fair trading and reduction of malpractices
• Carry out research work
• Encouraging self-regulating organizations
• Buy-sell mutual funds directly from AMC through a broker

Objectives of SEBI:

• The objectives of the Stock Exchange Board of India are:

1. Protection to the investors

The primary objective of SEBI is to protect the interest of people in the stock market and provide a healthy environment for them.

2. Prevention of malpractices

This was the reason why SEBI was formed. Among the main objectives, preventing malpractices is one of them.

3. Fair and proper functioning

SEBI is responsible for the orderly functioning of the capital markets and keeps a close check over the activities of the financial intermediaries such as brokers, sub-brokers, etc.

SEBI’s recent committees and chairperson :

Recent news About SEBI:

Sebi comes out with guidelines for KYC Registration Agencies

• Capital markets regulator Sebi issued fresh guidelines for KYC Registration Agencies (KRAs) whereby such agencies will have to independently validate KYC records of all clients from July 1.
• The move comes after Sebi, in January, notified new norms to make KRAs responsible for carrying out independent validation of the KYC records uploaded onto their system by Registered Intermediaries (RIs).

New guidelines :

• Under the notified rules, such agencies will have to maintain an audit trail of the upload/modification/download with respect to KYC records of clients.
• In a circular, Sebi said KRAs will independently validate records of those clients (existing as well as new) whose KYC has been completed using Aadhaar as an Officially Valid Document (OVD).
• The records of those clients who have completed KYC using non-Aadhaar OVD will be validated only upon receiving the Aadhaar number.
• The validation of all KYC records (new and existing) shall commence from July 1, 2022,” the Securities and Exchange Board of India (Sebi) said.
• According to the regulator, clients whose KYC records are not found to be valid by KRA after the validation process will be allowed to transact in securities market only after their KYC is validated.
• The regulator has put in place the additional guidelines on KRAs in order to implement the regulations effectively.
• KRAs will continue to act as repository of KYC data in the securities market and will be responsible for storing, safeguarding and retrieving the KYC documents.
• During the process of validation, KRAs will validate details pertaining to Aadhaar through Unique Identification Authority of India (UIDAI) authentication, PAN using the Income Tax database and mobile number and e-mail ID using one-time password validation.
• This is applicable only in cases where mobile number and e-mail ID provided by client are not seeded with Aadhaar.
• The KRAs will develop systems/mechanism, in consultation with SEBI and in co-ordination with each other.
• It will follow uniform internal guidelines detailing aspects of identification of KYC attributes and procedures for KYC validation.
• The systems of RIs and the KRAs will be integrated to facilitate seamless movement of KYC documents.
• KRAs will promptly inform the respective RIs of deficiency/inadequacy in client’s KYC documents, if any, that is observed for validation.
• On successful completion of KYC validation, Sebi said that a unique client identifier called KRA identifier will be assigned by KRA to the client.
• Such a KRA identifier may be used by the client for opening of account with any other intermediary, without repeating the KYC process.
• The KYC records of new clients, who have used Aadhaar as an officially valid document, will be validated within two days of receipt of KYC records by KRAs.
• The records of all existing clients will be validated within a period of 180 days from July 1.
• KRA will have to intimate about the KRA identifier to the client within two working days of receipt of KYC records.
• This has to be done by post or e-mail, and the KRA concerned will have to maintain the proof of dispatch.

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