The Securities and Exchange Board of India (Sebi) is likely to come out with new periodic reporting norms for market intermediaries like depository participants, merchant bankers and credit rating agencies. The capital market regulator’s move is aimed at enhancing the monitoring and inspection structure for market players after their renewal process was done away with last year.
Sebi introduced the concept of ‘permanent registration’ for all intermediaries in July 2011. Earlier, intermediaries, with a few exceptions like brokers, had to renew their application every three years. The purpose of renewal was to check whether the intermediaries were following requirements, such as networth criteria, infrastructure and “fit and proper” compliance.
While some intermediaries, like brokers and sub-brokers, were given permanent registration, intermediaries like merchant bankers, credit rating agencies, registrars and debenture trustees had to renew their licence application every three years.
| LIKELY CHANGES |
| * New periodic reporting structure for intermediaries |
| * Enhancement in the number of inspections |
| * External agencies may be asked to conduct intermediary inspections |
| * Sebi vetting applications before granting permanent licence |
“Permanent licence doesn’t mean Sebi has stopped monitoring. We will continue to keep a close eye on intermediaries to ensure proper compliance,” said a Sebi official. He further added the regulator was mulling carrying out inspection of intermediaries through third-party agencies like chartered accountants. Although Sebi has a mechanism of periodic reporting, it will further modify this to make it comprehensive. The rationale behind permanent registration instead of periodic renewal was to do away with tedious paper work, year after year. Instead, the regulator wanted to divert manpower towards strengthening inspection and supervision of intermediaries.
Now, as the intermediaries don’t have to knock at Sebi’s doors every three years for fresh licences, the regulator wants to ensure proper checks and balances are put in place so that the inspection process is not compromised. Meanwhile, market intermediaries supported the decision of doing away with licence renewals, but highlighted that there was a huge backlog of applications for permanent licence at Sebi.
“Our application for permanent licence is pending with Sebi for some time now. As they are granting a permanent licence, they want to be absolutely sure about any pending inquiries or compliance-related issues,” said a merchant banker who didn’t wish to be named.
At present, over 100 permanent registration applications of depository participants, nearly 40 applications of merchant bankers and about a dozen from registrars are pending with Sebi, according to information available on the regulator’s website.
In half the cases, the application is pending as Sebi is awaiting clarifications from the applicant. Despite that, intermediaries can carry out their normal activities as registered intermediaries, unless Sebi asks otherwise.
