SEBI

Securities & Exchange Board of India: SEBI Intermediaries Amendment Regulations, 2021

While exercising the powers conferred by section 30 of the SEBI Act, 1992, the Board now makes the following regulations to amend the SEBI Intermediaries Regulations, 2008. These regulations may be called the SEBI Intermediaries Amendment Regulations, 2021^[1].

Holding of inquiry

SEBI Intermediaries Amendment Regulation 25 will be substituted by the following:

• The designated authority must issue a notice to a person against whom an inquiry has been initiated to show cause as to why an action, as contemplated against the person, must not be recommended.
• The notice will be called upon to submit, within a period specified in the notice, not exceeding from the 21 days of the service date. A written reply to a notice and documentary evidence, in support of such a written reply, must be submitted.

• The designated authority, after recording reasons in writing, can extend the time specified in the notice for sufficient grounds shown by the notice.

• Every notice issued under sub-regulation (1) must specify the contravention alleged to have been committed by the notice by indicating the provisions of securities laws or the direction or the order of the Board alleged to have been contravened.
• There must be annexed to the notice issued under sub-regulation (1), copies of documents relied upon by Board along with the extracts of relevant portions of the reports which contains the findings arrived in an inquiry, investigation, or inspection.
• Suppose the notice demands inspection of such documents within the period specified in sub-regulation (2), and the designated authority believes that the same may be granted. In that case, the designated authority may issue or cause to issue a notice fixing a date for inspection of documents: The date for inspection of documents must be of 30 days.

• The designated authority must grant an opportunity of personal hearing and issue or cause a notice scheduling a date for hearing the notice: No opportunity of personal hearing can be granted in the cases where the notice is alleged to have failed to pay registration fee or any other applicable fees to the Board. The notice has been declared the wilful defaulter or fugitive economic offender.

• Suppose a notice does not reply to the notice issued under sub-regulation (1) or fails to appear on the hearing’s scheduled date. In that case, sufficient intimation would be provided to the notice. The designated authority can conclude the proceedings after recording the reasons for doing so, based on the material available on record.

Recommendation of action

SEBI Intermediaries Amendment Regulation 26 will be substituted by the following:

• After considering all material available on record and reply the designated authority by way of a report, recommend the following measures,–
  • Disposing of proceedings without any adverse action;
  • Cancellation of certificate of registration;
  • Suspension of a certificate of registration for a specified period;
  • Prohibition of notice from taking up any new assignment or contract or launching a new scheme for such the period as specified;
  • Debarment of an officer of notice from being employed or associated with a registered intermediary or other person associated with securities market for such period as specified;
  • Debarment of branch or office of the notice from carrying out activities for such period as may be specified;
  • Issuance of the regulatory censure to the notice
• In respect of same certificate of registration, not more than 5 regulatory censures under these regulations can be recommended to be issued.

• The designated authority must endeavor to submit the report within one hundred and twenty days from the date of receipt of the reply to the notice or date of personal hearing, whichever is later.”

SEBI Intermediaries Amendment: Order

SEBI Intermediaries Amendment Regulation 27 will be substituted by the following:

• On receipt of the report containing the designated authority’s measures, the designated member must cause to forward copy of the report submitted by designated authority. He shall call upon the notice to make its submission, in writing, why the measures recommended by designated authority or any other action as contemplated in these regulations should not be taken.
• The notice shall submit, within a period specified in the notice, but not exceeding from the 21 days of the date of service. A written submission, along with documentary evidence in support of the written submission: Provided that upon the request of a notice, the designated member may cause to extend the time specified for submitting a reply to the notice after recording reasons in writing.

• After considering the submission of a notice, the designated member may be recorded by it in writing, remit the matter to designated authority to inquire afresh, and further inquire and resubmit the report.
• The designated member can grant an opportunity of personal hearing where the designated authority has recommended cancelation of a certificate of registration or designated member is of a prima facie view that it is case for cancellation of registration certificate.

Explanation:– The designated member doesn’t need to give the notice any opportunity of personal hearing. Suppose neither the designated authority has been recommended cancelation of a certificate of registration nor designated member is of the prima facie view. In that case, it is a fit case for cancelling a registration certificate.

• After considering the facts & circumstances of the case, material on record, and the written submission, the designated member must endeavour to pass an appropriate order within one hundred and 20 days from a date of receiving of submissions under sub-regulation (2) or a date of personal hearing, whichever is later.

Conclusion

SEBI Intermediaries Amendment has made that it would not be necessary for DM to give the notice any opportunity of personal hearing if neither the DA has recommended cancellation of registration nor DM is of a prima facie view that it is a fit case for registration cancellation.

Read our article: Analysis of SEBI Relaxations relating to procedural matters – Issues & Listing