The President/Executive Director
All recognised stock exchanges.
Common members in the Appellate body and the Committees
As you are aware the Stock Exchanges have amended their Rules/Articles of Association in accordance with SEBI order dated April 20, 1993 under section 8 of the Securities Contracts (Regulation) Act, 1956 and constituted three Statutory Committees, viz, Arbitration, Defaults and Disciplinary Action Committees with 40% representation from member-brokers of the Exchange and 60% from non-members appointed with prior approval from SEBI. While generally the President and Executive Director are the ex-officio members of each of these Committees, a few Public Representatives and elected directors are also nominated on these committees. The Committees have, thus, a few members who are also the members of the Governing Board/Council of Management of the Exchange.
In some cases the aggrieved party has a right of appeal to the Governing Board/Council of Management against the decision of the Committee. Since some of the members on these Statutory Committees and the Governing Board/Council of Management are common, it has been brought to our notice that it would be inappropriate for the same committee members to be part of the appellate authority. There is a merit in this argument. It has, therefore, been suggested that the members, who have decided the arbitration case/imposed disciplinary or penal action while sitting in a Statutory Committee should not sit in the appellate body when the appeal is being considered in the same case. The other alternative would be not to appoint office bearers and members of the Governing Board/Council of Management as members of these Committees.
It has also been suggested by some of the Stock Exchanges that we may appoint retired judges in the Arbitration Committee to make it a more professional and impart quick and fair justice to the investors.
However, before taking a final view, we would like to have the views/comments of the Stock Exchanges on the above suggestions. Accordingly, you are requested to please forward to us views/comments of the Exchange in this regard at the earliest and in any case not later than April 15, 1995.