Description

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

Summary

SEBI has modified the mechanism for handling review, appeal or waiver of penalty requests emanating from Member Committee (MC) actions at Market Infrastructure Institutions (MIIs). The circular establishes a new two-tier appeal system where appeals against Internal Committee actions go to the MC, while appeals against MC actions will be handled by a separate mechanism involving Public Interest Directors and/or Independent External Professionals.

Key Points

  • New streamlined mechanism for handling penalty review, appeal or waiver requests
  • Two-tier system: IC appeals go to MC, MC appeals go to separate mechanism
  • Governing Board must establish mechanism with Public Interest Directors/Independent External Professionals
  • Standard Operating Procedure (SOP) required for handling MC appeal requests
  • Further appeals can be made to appropriate authority under applicable laws
  • Applicable to all Stock Exchanges, Clearing Corporations, and Depositories

Regulatory Changes

  • Modified Terms of Reference (ToR) for Member Committees of MIIs
  • Appeals against Internal Committee actions: handled by Member Committee
  • Appeals against Member Committee actions: handled by new mechanism established by Governing Board
  • Governing Board must create SOP for handling review/appeal requests from MC actions
  • Separation of appeal authority from original decision-making body for MC actions

Compliance Requirements

  • MIIs must implement necessary systems for the new appeal mechanism
  • Governing Boards must establish appeal mechanism with Public Interest Directors/Independent External Professionals
  • Amendment of relevant byelaws, rules and regulations where required
  • Creation of Standard Operating Procedures for handling MC appeals
  • Notification to market participants and website dissemination
  • Implementation within 45 days of circular issuance

Important Dates

  • Circular Date: August 05, 2025
  • Effective Date: 45 days from issuance (approximately September 19, 2025)
  • Implementation Deadline: All systems and procedures must be in place by effective date

Impact Assessment

  • Operational Impact: MIIs need to establish new appeal mechanisms and update procedures
  • Governance Impact: Enhanced separation of powers in penalty appeal process
  • Member Impact: Clearer appeal pathways for market participants facing regulatory actions
  • Compliance Burden: Moderate - requires procedural changes and bylaw amendments
  • Market Functionality: Minimal direct impact on trading operations, focused on regulatory processes

Impact Justification

Procedural change affecting appeal mechanisms for market participants but not directly impacting trading operations