The Securities and Exchange Board of India (SEBI) has amended the Securities and Exchange Board of India (Intermediaries) Regulations, 2008 through the Securities and Exchange Board of India (Intermediaries) (Second Amendment) Regulations, 2024. This amendment introduces Regulation 30A, which outlines procedures for summary proceedings against certain entities. These include stock brokers, clearing members, depository participants, and individuals found in violation of securities laws, non-payment of fees, or failure to submit periodic reports. The amendment establishes a clear process for issuing notices, receiving written submissions, and imposing penalties such as suspension or cancellation of registration certificates. The amended regulations also include provisions for ensuring that the rights and interests of investors and clients are safeguarded. Additionally, entities whose registration is cancelled are required to comply with specific actions such as transferring assets and liabilities or ceasing operations.
SECURITIES AND EXCHANGE BOARD OF INDIA
NOTIFICATION
Date: 4th December, 2024
SECURITIES AND EXCHANGE BOARD OF INDIA (INTERMEDIARIES) (SECOND AMENDMENT)
REGULATIONS, 2024
F. No. SEBI/LAD-NRO/GN/2024/216─In exercise of the powers conferred by section 30 of the Securities and Exchange Board of India Act, 1992 (15 of 1992), the Board hereby makes the following regulations to further amend the Securities and Exchange Board of India (Intermediaries) Regulations, 2008, namely: –
1. These regulations may be called the Securities and Exchange Board of India (Intermediaries) (Second Amendment) Regulations, 2024.
2. They shall come into force on the date of their publication in the Official Gazette.
3. In the Securities and Exchange Board of India (Intermediaries) Regulations, 2008, regulation 30A shall be substituted with the following regulation, namely, –
“Summary Proceedings
30A (1). Notwithstanding anything contained in these regulations, the procedure as provided under this regulation shall be applied to –
(a) the stock broker or a clearing member, in respect of which intimation has been received by the Board from all the stock exchange(s) or the clearing corporation(s), as the case may be, of which it was a member, that such stock broker or clearing member has been expelled as its member;
(b) a depository participant, in respect of which intimation has been received by the Board from all the depository(ies) where the participant was admitted, that the depository participant agreement has been terminated by the depository(ies);
(c) a person found to have made claim(s) of return or performance in respect of or related to a security or securities, unless otherwise permitted by the Board to make such claim(s);
(d) a person which fails to pay the fees, to the Board or to such body as may be specified, in terms of provisions of the relevant regulations governing such a person;
(e) a person not traceable at its physical address and email address available in the records of the Board;
(f) a person which has failed to submit periodic reports to the Board for three consecutive periods or such other period(s) as may be specified in the relevant regulations or circulars issued thereunder which govern such a person;
(g) a person which has admitted to have violated any of the provisions of the securities laws or directions, instructions or circulars issued by the Board.
(2) The competent authority shall issue a notice to the person referred to in sub-regulation (1) communicating the grounds for initiation of the proceedings under this regulation and the violation(s) alleged to have been committed by such person.
(3) The notice issued under sub-regulation (2) shall require the noticee to make submission(s), if any, within twenty-one calendar days from the date of receipt of the notice, only through a written response, along with documentary evidence, if any, as to why the certificate of registration granted under the Act and the regulations made thereunder shall not be cancelled or suspended:
Provided that the competent authority may, for the reasons to be recorded, permit the noticee to submit a written response within a further period not exceeding fifteen calendar days.
(4) No further opportunity beyond the timelines specified in sub-regulation (3) shall be allowed.
(5) After considering the facts and circumstances of the case, material on record and the written submissions, if any, the competent authority shall endeavor to pass an order within twenty-one calendar days from—
(i) the date of receipt of the written submissions of the noticee; or
(ii) the date of expiry of the time period granted by the competent authority to file the written submissions under sub-regulation (3), in case no written submissions are filed within the specified period.
(6) No opportunity of personal hearing shall be granted while disposing of the proceedings initiated under this regulation.
(7) The competent authority shall pass an appropriate order of cancellation or suspension of the certificate of registration of the noticee or any other order, as deemed fit.
(8) The competent authority may, while passing the order, impose such conditions upon the noticee as it deems fit to protect the interest of the investors or the clients of the noticee or the securities market.
(9) While passing the order, the competent authority shall, wherever considered necessary, require the noticee to satisfy the Board on the following—
(a) arrangements made for maintenance and preservation of records and other documents as required under the relevant regulations;
(b) redressal of investor grievances;
(c) transfer of records, funds or securities of its clients;
(d) arrangements made for ensuring continuity of service to the clients;
(e) defaults or pending action, if any;
(f) such other conditions in the interest of investors or the client(s) of the noticee or the securities market.
(10) On and from the date of cancellation of the certificate of registration, the noticee shall forthwith –
(a) return to the Board the certificate of registration so cancelled, if the same has been issued in the physical form and shall not represent itself to be a holder of the certificate for any purpose;
(b) cease to carry on any activity in relation to which the certificate had been granted;
(c) transfer its activities to another person holding a valid certificate of registration to carry on such activity or allow its clients or investors to withdraw or transfer their securities or funds held in its custody or to withdraw any assignment given to it, without any additional cost to such client or investor;
(d) make provisions as regards any liability incurred or assumed by it;
(e) take such other action including action relating to any record(s) or document(s) and securities or money of the investors that may be in the custody or control of such person, within the time and in the manner, as may be required under the relevant regulations or as may be directed by the competent authority while passing the order under this regulation.
(11) A copy of the order passed under this regulation shall be–
(a) sent to the noticee;
(b) sent to the stock exchange(s) or the clearing corporation(s) or the depository(ies) or the body or body corporate recognized by the Board for administration and supervision of the intermediary, as the case may be, and shall be uploaded on their respective websites; and
(c) uploaded on the website of the Board.”
BABITHA RAYUDU, Executive Director
[ADVT.-III/4/Exty./742/2024-25]
Footnote:
1. The Securities and Exchange Board of India (Intermediaries) Regulations, 2008 was published in the Gazette of India, Part III Section 4 on May 26, 2008 vide notification No. LAD-NRO/GN/2008/11/126538.
2. The Securities and Exchange Board of India (Intermediaries) Regulations, 2008 was subsequently amended on: –
a) August 11, 2008 by the Securities and Exchange Board of India (Stock Brokers and Sub-Brokers) (Amendment) Regulations, 2008, vide notification No. LAD-NRO/GN/2008/20/134766.
b.) July 14, 2009 by the Securities and Exchange Board of India (Intermediaries) (Amendment) Regulations, 2009, vide notification no. LAD-NRO/GN/2009-10/12/169546.
c) January 7, 2014 by the Securities and Exchange Board of India (Foreign Portfolio Investors) Regulations, 2014, vide notification no. LAD-NRO/GN/2013-14/36/12.
d) May 25, 2016 by the Securities and Exchange Board of India (Intermediaries) (Amendment) Regulations, 2016, vide notification no. SEBI/LAD-NRO/GN/2016-17/006.
e) November 21, 2017, by the Securities and Exchange Board of India (Intermediaries) (Amendment) Regulations, 2017, vide notification no. SEBI/LAD-NRO/GN/2017-18/021.
f) April 17, 2020, by the Securities and Exchange Board of India (Regulatory Sandbox) (Amendment) Regulations, 2020, vide notification no. SEBI/LAD-NRO/GN/2020/10.
g) January 21, 2021, by the Securities and Exchange Board of India (Intermediaries) (Amendment) Regulations, 2021, vide notification no. SEBI/LAD-NRO/GN/2021/07.
h) May 5, 2021, by the Securities and Exchange Board of India (Intermediaries) (Second Amendment) Regulations, 2021,vide notification no. SEBI/LAD-NRO/GN/2021/20.
i) August 3, 2021, by the Securities and Exchange Board of India (Regulatory Sandbox) (Amendment) Regulations, 2021, vide notification no. SEBI/LAD-NRO/GN/2021/30.
j) November 17, 2021,by the Securities and Exchange Board of India (Intermediaries) (Third Amendment) Regulations, 2021, vide notification no. SEBI/LAD-NRO/GN/2021/59.
k) August 1, 2022, by the Securities and Exchange Board of India (Intermediaries) (Amendment) Regulations, 2022, vide notification no. SEBI/LAD-NRO/GN/2022/91.
l) August 29, 2024, by the Securities and Exchange Board of India (Intermediaries) (Amendment) Regulations, 2024, vide notification no. SEBI/LAD-NRO/GN/2024/201.
