Sebi asks MIIs to resolve whistleblower complaints within 60 days

Sebi on Friday came out with guidelines to strengthen accountability and improve governance of stock exchanges and other market infrastructure institutions (MIIs) by asking them to resolve whistleblower complaints within 60 days of receipt.

Additionally, Sebi asked MIIs, comprising stock exchanges, clearing corporations and depositories, to adopt RegTech (regulatory technologies) and SupTech (supervision technologies) for better regulatory and supervisory mechanisms.

Also, the regulator outlined guidelines for back office vendors, public interest directors (PIDs) meetings, establishing a standard operating procedure for disciplinary actions against Key Management Personnel (KMPs), disclosure of board meeting agendas and minutes, quarterly reporting by the Compliance Officer and half-yearly reporting by the Chief Risk Officer.

 

The new guidelines will become effective from April 1, the Securities and Exchange Board of India (Sebi) said in its circular.

On whistleblower policy, Sebi asked MIIs to resolve whistleblower complaints within 60 days of receipt.

The regulator has specified the role of the audit committee in overseeing whistleblower complaints. It is tasked with receiving and investigating such complaints and making appropriate decisions, including recommending further actions when necessary.

The committee is required to submit a detailed quarterly report to the MII's Governing Board, outlining the complaints received, the actions taken, and any unresolved issues.

If a decision cannot be reached on a particular matter, it must escalate the issue to the Governing Board for resolution.

With regards to RegTech and SupTech, Sebi asked MIIs to implement systems enabling members or participants, such as stock brokers, clearing members, and depository participants, to make submissions online, reducing reliance on physical documentation. These systems should generate alerts and reports to support regulatory objectives.

Also, MIIs are required to disclose key information about their members or participants on their websites, including details of investor grievances (resolved and pending) for the last three financial years, regulatory actions taken, net worth as of the previous financial year, and other relevant data.

Additionally, any significant regulatory non-compliance by a member must be shared with other MIIs to ensure transparency and accountability.

To ensure regulatory compliance by back-office vendors or outsourced agencies appointed by MIIs and their members or participants, MIIs must establish policies for their appointment and monitoring.

These policies should clearly identify potential risks associated with such vendors or agencies and outline measures to mitigate them.

Additionally, the policies must define minimum standards or thresholds, both qualitative and quantitative that vendors must meet to qualify for appointment, including standards for technology vendors.

To enhance accountability within MIIs, Sebi asked public Interest Directors (PIDs) to meet at least once every six months, with mandatory attendance from all members.

These meetings focus on reviewing compliance with Sebi regulations, assessing the functioning of critical areas, such as operations, regulatory compliance, risk management, and investor grievances, and evaluating the adequacy of financial and human resources for these functions.

Additionally, PIDs are required to identify potential conflicts of interest and address issues with significant market impacts.

Sebi asked MIIs to frame internal Standard Operating Procedures (SOPs) for undertaking disciplinary actions against KMPs or any non-compliance with regulatory provisions and internal guidelines. The policy should be approved by the Nomination and Remuneration Committee (NRC) and the Governing Board of the MII.

The SOP include a list of actions that may be initiated against a KMP for breach of any provision, including advisory, warning, impact on annual increment or promotion, suspension and termination.

Compliance Officers are required to report non-compliance and investor grievance redressal quarterly. These reports are required to be submitted to Sebi within 45 days of the quarter's end.

Besides, Chief Risk Officers have been asked to submit reports on overall risk management on half yearly basis, and the report needs to be submitted to the regulator within 90 days of the half-year's end.

Sebi has directed MIIs to disclose regulatory, compliance, risk management, and investor grievance-related agendas and minutes on their websites.