On July 13, 2018 SEBI has issued a Consultative Paper on proposed SEBI (Fiduciaries in the Securities Market) (Amendment) Regulations which has been uploaded on the SEBI website for seeking public comments.

The said Amendment Regulations proposes to bring amendment in various Regulations concerning the entities not registered with SEBI and who undertake third party fiduciary duty or assignment or engagement under the securities laws, in respect of any Issuer, Listed Companies, Pooled Investment Vehicle, Restructuring, Intermediaries, Market Infrastructure Entities or investors in the securities and issues any certificate, report etc. The fiduciary has been defined to include Chartered Accountants, Company Secretaries, Cost Accountants, Valuers, Monitoring Agencies, etc. It has been proposed that such a fiduciary shall ensure that the certificates, reports etc. issued by it are true in all material respects. These requirements would be in addition to their obligations under the respective laws.

These provisions which would require fiduciary to ensure that the certificates, reports etc. which are required to be issued by it under securities regulations are true in all material respects.

These Regulations seeks to ensure compliance with securities regulations by these entities.

In the said consultation paper, SEBI has proposed to clarify that the Board, if after making or causing to be made an inquiry or investigation, is satisfied that the fiduciary has submitted false certificate or report, or has violated any of the provisions of SEBI regulations, the Board may take appropriate action under the concerned securities laws or regulations, against the fiduciary, its engagement partner or director, as the case may be.

Under the existing Securities Laws, depending on the nature of violations, SEBI may inter alia initiate actions under Section 11, 11B of SEBI Act for issuing appropriate directions, Adjudication Proceedings for imposing monetary penalty and/or institute Prosecution.

This was stated by Shri Pon. Radhakrishnan, Minister of State for Finance in a Written reply to a question in Lok Sabha.

Fiduciary duty in securities market: proposed rules require non registered advisers to ensure reports are materially true. Proposed amendments impose fiduciary obligations on non registered entities performing third party assignments under securities laws, defining fiduciary to include professionals such as chartered accountants and valuers, and requiring that certificates and reports they issue be true in all material respects. The paper provides that the Board, after inquiry or investigation, may take regulatory actions if a fiduciary submits false reports or violates SEBI regulations, including directions, adjudication for penalties and prosecution, thereby enhancing accountability and compliance by such fiduciaries.