SEBI asks MII to address whistleblower complaints in 60 days, outlines guidelines on governance

Sebi on Friday issued guidelines to strengthen accountability and improve governance of stock exchanges and other market infrastructure institutions (MIIs) and asked them to resolve whistleblower complaints within 60 days of receiving them. Further, SEBI asked MIIs, which include stock exchanges, clearing corporations and depositories, to adopt RegTech (regulatory technologies) and SupTech (supervisory technologies) for better regulatory and supervisory mechanisms.

Also, the regulator has established standard operating procedures for disciplinary action against back office vendors, public interest directors (PIDs) meetings, disciplinary action against key management personnel (KMPs), publication of board meeting agendas and minutes, quarterly report by the compliance officer and half-yearly report by the chief risk officer.

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

On the whistleblower policy, SEBI asked MIIs to resolve whistleblower complaints within 60 days of receiving them.

The regulator has clarified the role of the Audit Committee in monitoring whistleblower complaints. It is tasked with receiving and investigating such complaints and taking appropriate decisions including recommending further action when necessary.

The committee is required to submit a detailed quarterly report to MII’s governing board, outlining complaints received, action taken and any unresolved issues.

If no decision can be reached on a particular matter, he should escalate the matter to the Governing Board for resolution.

In terms of RegTech and SupTech, SEBI asked MIIs to implement systems that enable members or participants, such as stockbrokers, clearing members and depository participants, to make online submissions, reducing reliance on physical documents. 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 website, including details of investor complaints (resolved and pending) for the last three financial years, regulatory action taken, net worth as per previous financial year and others. Related data.

In addition, 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 employed by MIIs and their members or participants, MIIs must establish policies for their appointment and oversight.

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

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

To increase accountability within the MII, SEBI asked the Public Interest Directors (PIDs) to meet at least once every six months with mandatory attendance of each member.

These meetings focus on reviewing compliance with SEBI rules, assessing the performance of critical areas such as operations, regulatory compliance, risk management and investor complaints, and assessing 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 prepare internal Standard Operating Procedures (SOPs) for taking disciplinary action against KMPs or 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 MII.

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

Compliance officers are required to report quarterly on non-compliance and investor grievance redressal. These reports are required to be submitted to SEBI within 45 days of the end of the quarter.

In addition, chief risk officers have been asked to submit reports on overall risk management on a half-yearly basis, and the report is required to be submitted to the regulator within 90 days of the end of the half-year.

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