Description

SEBI modifies the mechanism for handling review, appeal or waiver requests for penalties imposed by Member Committees of market infrastructure institutions.

Summary

SEBI has modified the mechanism for handling review, appeal or waiver of penalty requests against actions taken by Member Committees of Stock Exchanges, Clearing Corporations and Depositories. The new framework distinguishes between appeals against Internal Committee actions (handled by Member Committee) and appeals against Member Committee actions (handled by separate mechanism with Public Interest Directors).

Key Points

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

Regulatory Changes

  • Modified Terms of Reference for Member Committees regarding penalty appeal handling
  • Introduction of two-tier appeal mechanism based on originating authority
  • Requirement for Governing Boards to establish new appeal mechanisms with independent oversight
  • Mandatory development of Standard Operating Procedures for new appeal processes

Compliance Requirements

  • All Market Infrastructure Institutions must implement necessary systems for the new mechanism
  • Amendment of relevant byelaws, rules and regulations where required
  • Dissemination of circular provisions to market participants and on institutional websites
  • Establishment of appeal mechanisms by Governing Boards with Public Interest Directors
  • Development and implementation of Standard Operating Procedures

Important Dates

  • Circular Date: August 5, 2025
  • Effective Date: 45 days from circular issuance (September 19, 2025)
  • Implementation Deadline: All systems and amendments must be in place by effective date

Impact Assessment

Operational Impact: Market Infrastructure Institutions need to restructure their penalty appeal processes and establish new governance mechanisms. This may require additional resources and procedural changes.

Market Participant Impact: Enhanced independence in appeal processes for penalties imposed by Member Committees, potentially providing more balanced review mechanisms for regulatory actions.

Governance Impact: Strengthens oversight by involving Public Interest Directors and Independent External Professionals in appeal processes, improving transparency and fairness in penalty reviews.

Impact Justification

Affects procedural aspects of penalty appeals for all market participants but doesn't change trading or listing operations directly