Sebi notifies special procedure for action on expulsion from exchange’s membership

By: |
May 07, 2021 7:05 PM

This framework will also be applicable in the case of termination of depository participant agreement by the depositories.

In addition, they have been restrained from associating with any listed company or any registered intermediary during such a period.In addition, they have been restrained from associating with any listed company or any registered intermediary during such a period.

Markets regulator Sebi has come out with a special procedure for action on expulsion from membership of stock exchanges and clearing corporations.

Under this procedure, the Securities and Exchange Board of India (Sebi) will not provide an opportunity for a personal hearing to the stockbroker or clearing member, according to a notification issued on Wednesday.

This framework will also be applicable in the case of termination of depository participant agreement by the depositories.

On receipt of intimation from exchanges or clearing corporations regarding the expulsion of its trading or clearing member, Sebi will issue a notice to such stockbroker or clearing member calling upon the noticee to make its submission within 21 days through a written reply, along with documentary evidence, as to why the certificate of registration, granted under the rules should not be cancelled.

“No opportunity of personal hearing shall be granted while disposing of the proceedings under this regulation,” Sebi said, adding it will pass an order within 21 days from the date of receipt of written submissions.

While passing such an order, the regulator can impose such conditions upon the entity as it deems fit to protect the interest of the investors or the securities market.

The entity concerned need to satisfy the factors — maintenance and preservation of records, redressal of investor grievances; transfer of records, funds or securities of its clients; the arrangements made by it for ensuring continuity of service to the clients; and defaults or pending action.

From the date of cancellation, the entity concerned will return the certificate of registration and will not represent itself to be a holder of the certificate for carrying out the activity for which such certificate had been granted.

Further, it will “cease to carry on any activity in respect of which the certificate had been granted”.

The entity will have to transfer its activities to another person holding a valid registration certificate to carry on such activity and allow its clients to withdraw or transfer their securities and funds held in its custody or to withdraw any assignment given to it, without any additional cost to such client, Sebi said.

In addition, the entity will have to make provisions with regard to liability incurred or assumed by it.

A copy of the order passed under this regulation will be sent to the noticee and also uploaded on the website of Sebi.

The intimation of the cancellation of the certificate of registration will be sent to the stock exchanges or the clearing corporations or the depository, as the case may be.

To give effect to this, the regulator has notified the Sebi (Intermediaries) Regulations, 2021. The new rule has come into effect from May 5.

In a separate notification, Sebi has notified rules, whereby intermediaries will have to pay fees only through an online payment gateway and done away with the physical mode of payment to encourage digital payment.

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