Capital markets regulator Sebi on Tuesday proposed introducing provisions for “summary proceeding” in the intermediaries rules to handle certain violations of securities laws by intermediaries more swiftly and efficiently. In this regard, the Securities and Exchange Board of India (Sebi) has floated a consultation paper to invite public comments till August 6 on proposed amendments to the Intermediaries Rules, 2008.
Summary proceedings allow the entity to present reasons why the facts leading to the proceedings should not result in adverse consequences against it.
Earlier, summary proceedings were part of Chapter III of the erstwhile Sebi (Procedure of Holding Enquiry by Enquiry Officer and Imposing Penalty) Regulations, 2002. However, with the promulgation of the Intermediaries Regulations in 2008, these rules were repealed in May 2008.
In its consultation paper, Sebi said the proposed provisions of the summary proceedings will include the provisions for identifying the cases for summary proceedings and provisions detailing the summary procedure.
The regulator said that certain kinds of violations, which are obvious in nature, are either accepted by the intermediary or need minimal evidence to corroborate the facts, and a different approach is needed to deal with them.
One common violation is intermediaries not paying fees to keep their registration active, leading to expired registrations that need cancellation. Current procedures for cancelling these are lengthy.
Similarly, some intermediaries repeatedly fail to submit periodic reports on time. For these kinds of violations, the ordinary procedure of handling cases under Chapter V of the Intermediaries Regulations may be time-consuming, inefficient, non-uniform and cumbersome, even to the intermediaries, the regulator said.
As per the consultation paper, summary proceedings will apply to intermediaries in cases of expulsion by stock exchanges or clearing corporations, termination of depository agreements, false or misleading claims about returns or performance and non-payment of required fees.
In addition, summary proceedings will apply in case the intermediary being untraceable, fails to submit periodic reports for a specified number of times and admission of violations by the intermediary.
On the summary procedure, the regulator proposed that intermediaries will get 21 days to respond in writing to notices.
The authority should aim to decide within 21 days of receiving the response or after the response period expires. The authority can cancel or suspend the intermediary’s registration or take other actions as appropriate.
Intermediaries may need to meet certain conditions when orders are passed.
Orders will be sent to the intermediary, posted on Sebi’s website and sent to relevant stock exchanges, clearing corporations, depositories, or supervisory bodies for posting on their websites.
