Review, Appeal or Waiver of penalty requests emanating out of actions taken by the Member Committee

Description

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

Summary

SEBI has modified the mechanism for handling review, appeal or waiver of penalty requests emanating from Member Committee actions at Market Infrastructure Institutions (MIIs). The new framework distinguishes between appeals against Internal Committee actions versus Member Committee actions, with the latter requiring a separate mechanism involving Public Interest Directors and Independent External Professionals.

Key Points

• Review/appeal requests against Internal Committee actions will continue to be handled by Member Committee
• Appeals against Member Committee actions must now be handled by a separate mechanism setup by Governing Board
• New mechanism must involve Public Interest Directors and/or Independent External Professionals not part of Member Committee
• Governing Board must issue Standard Operating Procedures for handling such appeals
• Further appeals can be made to appropriate authority under applicable laws

Regulatory Changes

• Modified Terms of Reference for Member Committees regarding penalty appeal handling
• Separation of appeal mechanisms based on originating authority (Internal Committee vs Member Committee)
• Mandatory involvement of independent professionals in Member Committee appeal reviews
• Requirement for Governing Board to establish formal SOPs

Compliance Requirements

• All MIIs must implement necessary systems for the new framework
• Amendment of relevant byelaws, rules and regulations where required
• Dissemination of circular provisions to market participants and on websites
• Setup of new appeal mechanism with appropriate governance structure

Important Dates

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

Impact Assessment

This change strengthens governance by ensuring independence in reviewing Member Committee decisions, potentially improving fairness in penalty appeals. Market participants will have clearer appeal pathways with enhanced oversight. MIIs need to establish new governance structures and procedures, requiring operational adjustments but improving regulatory compliance framework.

Impact Justification

Changes governance structure for penalty appeals affecting all market participants but not immediately disruptive