Description

SEBI modifies the mechanism for handling review, appeal or waiver of penalty requests against Member Committee actions, establishing new governance structure with Public Interest Directors.

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 circular establishes a new governance structure involving Public Interest Directors and Independent External Professionals for appeals against Member Committee decisions.

Key Points

  • Appeals against Internal Committee or pre-approved policy actions continue to go to Member Committee
  • New mechanism required for appeals against Member Committee decisions themselves
  • Governing Board must establish appeal mechanism with Public Interest Directors/Independent External Professionals
  • Standard Operating Procedures must be issued by Governing Boards
  • Further appeals can be made to appropriate authorities under applicable laws

Regulatory Changes

  • Modified Terms of Reference for Member Committees regarding penalty appeals
  • Introduction of two-tier appeal system distinguishing between Internal Committee and Member Committee actions
  • Mandatory establishment of independent appeal mechanism by Governing Boards
  • Requirement for Standard Operating Procedures for new appeal processes

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 Boards must establish appeal mechanisms with appropriate composition
  • Development and issuance of Standard Operating Procedures

Important Dates

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

Impact Assessment

This circular enhances the governance framework for penalty appeals by introducing independent oversight for Member Committee decisions. It provides better separation of powers and ensures fair hearing mechanisms for market participants. The impact is primarily procedural, affecting the administrative processes of MIIs rather than direct market operations. Market participants will benefit from improved appeal mechanisms with independent review panels.

Impact Justification

Affects penalty appeal mechanism for all market participants but doesn't change trading operations directly