Description

SEBI modifies the mechanism for handling review, appeal or waiver of penalty requests against Member Committee actions.

Summary

SEBI has modified the mechanism for handling review, appeal or waiver of penalty requests against actions taken by Member Committees of Market Infrastructure Institutions (Stock Exchanges, Clearing Corporations, and Depositories). The changes establish a two-tier system where appeals against Internal Committee actions go to Member Committee, while appeals against Member Committee actions require a separate mechanism with Public Interest Directors.

Key Points

  • Appeals against Internal Committee actions or pre-approved policy actions will be handled by Member Committee
  • Appeals against Member Committee actions require new mechanism with Public Interest Directors/Independent External Professionals
  • Governing Board must establish Standard Operating Procedures for the new appeal mechanism
  • Further appeals can be made to appropriate authorities under applicable laws
  • Applies to all Stock Exchanges, Clearing Corporations, and Depositories

Regulatory Changes

  • Modified Terms of Reference for Member Committee on regulatory actions
  • Established two-tier appeal system based on originating authority of penalty action
  • Requirement for Governing Board to setup appeal mechanism with independent oversight
  • Mandatory Standard Operating Procedures for handling Member Committee appeals

Compliance Requirements

  • All MIIs must implement necessary systems for the new appeal mechanism
  • Amendment of relevant byelaws, rules and regulations where required
  • Notification to market participants and website dissemination
  • Governing Board must establish SOP for Member Committee appeals

Important Dates

  • Circular Date: August 5, 2025
  • Effective Date: 45 days from circular issuance (approximately September 19, 2025)

Impact Assessment

The changes create a more structured and independent appeal process for regulatory actions, particularly for Member Committee decisions. This should enhance procedural fairness and provide better separation of appeal functions. Market participants will have clearer pathways for challenging regulatory actions, though the practical impact depends on implementation of the new mechanisms by individual MIIs.

Impact Justification

Affects procedural framework for penalty appeals but doesn't immediately impact trading operations