Securities and Exchange Board of India (SEBI) has proposed amendments to the SEBI (Depositories and Participants) Regulations, 2018, to improve compliance and consistency in payment processes. These amendments focus on three key areas: (1) requiring depositories to provide a Chartered Accountant-certified statement for the correctness and verification of annual charges; (2) specifying a fixed timeline for the payment of annual fees, aligning it with SECC regulations, and setting a deadline of 15 days from the beginning of the financial year; and (3) introducing a mechanism for levying interest at 15% per annum on unpaid, late, or underpaid annual fees and charges. These measures aim to streamline the regulatory framework and ensure accuracy and timeliness in financial transactions between depositories and SEBI. The changes are proposed to come into effect from April 1, 2025.
Securities and Exchange Board of India
Amendments to Securities and Exchange Board of India (Depositories and Participants) Regulations, 2018 for provisions related to payment of Annual Fee and Annual Charge by the depositories.
1. Objective
1.1. This memorandum proposes amendments to the Securities and Exchange Board of India (Depositories and Participants) Regulations, 2018 (hereinafter referred as ‘D&P Regulations, 2018’) for making provision in respect of the following:
1.1.1. directing the depositories to obtain certification from a Chartered Accountant with regard to correctness of computation and independent verification of annual charges paid by the depositories to the Board;
1.1.2. specifying the timeline for payment of annual fee by the depositories; and 1.1.3. levying interest on the depositories for non-payment, belated payment or short payment of annual fee and annual charge to the Board.
2. Background
2.1. Regulation 11 of the Securities Contracts (Regulation) (Stock Exchanges and Clearing Corporations) Regulations, 2018 (hereinafter referred as ‘SECC Regulations, 2018’), inter alia, provides that –
2.1.1. The statement of computation of fees (both based on annual turnover and listing fees) shall be certified to be correct by a chartered accountant; and
2.1.2. Without prejudice to any other action that may be taken by the Board under the Act, rules or regulations, in case of non-payment, belated payment or short payment of fee (both based on annual turnover and listing fees) by stock exchanges to the Board, the stock exchanges shall be liable to pay an interest of fifteen per cent per annum on the amount remaining unpaid or belatedly paid or short-paid, for every month of delay or part thereof to the Board.
2.2. Currently, there is no such provision in the D&P Regulations, 2018 to ensure correctness of computation and independent verification of annual charges paid to the Board and to deal with the issues related to non-payment, belated payment or short payment of annual fee and annual charge by the depositories.
2.3. Existing Regulatory Provision under D&P Regulations, 2018
2.3.1. The relevant provisions with respect to annual fee and annual charge to be paid by the depositories are provided in Regulation 8 and 9 of the D&P Regulations, 2018, respectively. The annual fee and annual charge to be paid by the depositories are specified in Part A of the Second Schedule. The aforementioned provisions of the D&P Regulations, 2018 are as under:
2.3.1.1. “Payment of annual fee
8. A depository who has been granted a certificate of registration under regulation 7, shall pay annual fee specified in Part A of the Second Schedule in the manner specified in Part B thereof.
2.3.1.2. Payment of annual charge
9. A depository shall, within fifteen days from the end of each month, pay as provided in Part A of the Second Schedule, a percentage of the annual custody charges received by it from the issuers during the month, to the Board in the manner provided in Part B thereof.
2.3.1.3. PART A of Second Schedule of D&P Regulations, 2018 states that
| APPLICATION FEES, REGISTRATION FEES, ANNUAL CHARGE AND ANNUAL FEES | |
| Application fees payable by applicant | (Rs.) 5,00,000 |
| Application fees payable by participant | (Rs.) 15,000 |
| Registration fees payable by
depository |
(Rs.) 1,00,00,000 |
| Registration fees payable by participant | (Rs.) 2,00,000 |
| Annual fees payable by depository | (Rs.) 50,00,000 |
| Annual fees payable by participant | (Rs.) 1,000 |
| Annual charges payable by depository | 2% of annual custody charges ollected by depositories from issuers |
2.4. Currently, there is no timeline specified in the D&P Regulations, 2018 for payment of annual fee by the depository to the Board. However, vide letter dated November 30, 2014 the depositories were directed to pay the annual fee within 30 days of the beginning of the financial year.
3. Need for Review
3.1. To have consistency in regulatory approach with regard to timely payment of various fees and charges to the Board by stock exchanges and depositories, correctness in computation and independent verification of such charges and having an appropriate provision in place in case of unpaid or belatedly paid or short-paid of such fees and charges to the Board, D&P Regulations, 2018 may be suitably amended to align with the provisions of SECC Regulations, 2018.
4. Proposals
4.1. In view of the above, the following are proposed:
4.1.1. In order to ensure correctness in computation and independent verification of annual charges paid to the Board by the depository, the depository may provide a statement of computation of annual charges certified to be correct by a chartered accountant. Further, as the annual fee to be paid by the depository i.e. Rs. 50 lakhs is fixed under the D&P Regulations, 2018, the requirement for CA certification is not proposed for annual fee paid by the depository. Thus, Regulation 9 of D&P Regulations, 2018 may be amended as under (insertion shown in underline):
“9.(1) A depository shall, within fifteen days from the end of each month, pay as provided in Part A of the Second Schedule, a percentage of the annual custody charges received by it from the issuers during the month, to the Board in the manner provided in Part B thereof.
(2) The depository shall intimate the Board, the details of remittance along with the statement of computation of annual charges certified to be correct by a chartered accountant.”
4.1.2. In order to streamline the timelines for payment of annual fee by depositories to the Board, which was issued through letter dated November 20, 2014, it is proposed that the said timeline may be included under the D&P Regulations, 2018. Further, as per SECC Regulations, 2018 and D&P Regulations, 2018, the timeline for payment of regulatory fee (both based on annual turnover and listing fees) and annual charge (2% of annual custody charges collected), by stock exchanges and depositories, respectively, is within fifteen days from the end of the financial year. Also, as per SECC Regulations, 2018, the timeline for payment of flat regulatory fee of one lakh rupees on the aggregate value of transactions on agricultural commodity derivatives is within fifteen days from the end of the financial year. Thus, in order to have a consistency, the annual fee of depositories as specified in Part A of the Second Schedule of D&P Regulations, 2018, may be paid within fifteen days of the beginning of each financial year and Regulation 8 of D&P Regulations, 2018 may be amended as under (insertion shown in underline):
“8. A depository who has been granted a certificate of registration under regulation 7, shall pay, within fifteen days from the beginning of each financial year, the annual fee specified in Part A of the Second Schedule in the manner specified in Part B thereof.”
4.1.3. In order to ensure timely payment of annual fee and annual charge by the depositories and to align with the provisions under SECC Regulations, 2018 applicable for stock exchanges, it is proposed to have the mechanism for levy of interest in case of non-payment, belated payment or short payment of annual fee and annual charge by depository under D&P Regulations, 2018. Thus, a new regulation after Regulation 9 under the D&P Regulations, 2018 may be inserted as under:
“9A. Where due to the default of the depository, any fee which was liable to be paid to the Board under Regulation 8 and Regulation 9 remains unpaid or is paid belatedly or is short-paid by depository, it shall, without prejudice to any other action that may be taken under the Act, rules or regulations, pay an interest of fifteen per cent per annum on the amount remaining unpaid or belatedly paid or short-paid, for every month of delay or part thereof to the Board.”
4.2. Based on the proposals at paragraph 4.1 above, the proposed amendments to D&P Regulations, 2018 is enclosed at Annexure I. The draft notification for amendments to D&P Regulations, 2018 is placed at Annexure-II.
5. Consideration and approval of the Board
5.1. The Board is requested to consider and approve the following:
5.1.1. Proposals under paragraph 4.1 above;
5.1.2. The amendments to D&P Regulations, 2018 may come into force w.e.f. April 01, 2025.
5.1.3. The Board may authorize the Chairperson to take steps to implement the decisions with consequential, incidental and appropriate changes, as may be required in this regard.
Annexure I
(This has been excised for reasons of confidentiality)
Annexure II
(Amendments shall be notified after following the due process)
Source: SEBI Board Meeting Dated: Wednesday 18th December 2024
