TaxTMI 
TaxTMI 
Procedural norms on Recognitions, Ownership and Governance for Stock Exchanges and Clearing Corporations.
X X X X Extracts X X X X
X X X X Extracts X X X X
....plicant seeking recognition as a stock exchange/ clearing corporation shall substantiate its capability to fulfill all the requirements laid down under SCRA, SCRR and regulation 7 of the SECC Regulations at the time of making the application. 1.2 Further, for the purpose of grant of in-principle approval under regulation 7(5) of the SECC Regulations, the Board may take into account the factors which it may deem fit in the interest of the securities market. For this purpose, the Board may consider the information and documents including but not limited to the following:-: • Business feasibility plan for the next five years, • Net worth certificate/ financial books and bank account details, • Detailed write-up on each of its functions, • Details of authorised officials along with specimen signatures of the authorised signatories, • Proposed organisational structure, • Necessary undertakings, • Manpower planning, • Background and necessary information (as specified herein) to establish that its shareholders/promoters are fit and proper persons, Information regarding its Off....
X X X X Extracts X X X X
X X X X Extracts X X X X
....nition in terms of second proviso of regulation 3 of the SECC Regulations and has a networth of less than Rs. 300 crore shall submit its plan duly approved by its shareholders to SEBI, for achieving the networth in terms of regulation 14 of the SECC Regulations, within 90 days from the date of this circular. PART -B OWNERSHIP 4. Application for grant of approval for shareholding beyond 2% or 5%:- 4.1 A shareholder seeking SEBI's approval for holding more than 2% or 5% of paid up equity share capital of a stock exchange or clearing corporation shall submit the following particulars:- a) Name b) Address c) Details of employment/ business, if any: d) SEBI registration number,if any. e) Details of registration with other statutory authorities,. f) Declaration regarding the fulfillment of requirements of regulation 20 of SECC Regulations. g) Details of action /penalties taken/imposed against/upon him/it by any statutory authority in India or abroad. h) Details of activities that may, in the opinion of the shareholder, lead to his/its disqualification. i) Association with trading member....
X X X X Extracts X X X X
X X X X Extracts X X X X
....trading member or clearing member. i) Details of regulatory action taken against by any statutory authority in India . j) Details of activities that may in the opinion of the director, lead to his disqualification. k) Association with trading members/clearing members of stock exchanges/clearing corporations. l) Disclosure of the names of his dependents associated with the securities market as member, sub-broker, authorized person or holding any SEBI registration. m) An undertaking that he shall abide by the code of conduct and code of ethics prescribed in Part A and Part B of Schedule II to SECC Regulations. n) In the case of public interest directors, consent letters for acting as a public interest director. o) Pending / completed criminal cases pending before any authority in India or abroad, if any. 6.1.1 The stock exchange/ clearing corporation shall forward the above details to SEBI while recommending their names alongwith the minutes of the governing board meeting where their name/s was approved, copy of the shareholder's resolution (wherever applicable), a confirmation by the stock exchange/ clearing....
X X X X Extracts X X X X
X X X X Extracts X X X X
....lar traders/ speculators in the market or are director in the board of the promoter entity of the Stock Exchange or Clearing Corporation, shall be excluded. 6.3.3 Chairperson of the stock exchange/ clearing corporation shall be appointment with the prior approval of SEBI. 6.3.4 Public interest directors shall not be simultaneously on the board of any other stock exchange/ clearing corporation or their subsidiary. 6.3.5 Public interest directors shall peruse the relevant laws, code of conduct, code of ethics, etc and submit an undertaking to the stock exchange/clearing corporation that they are aware of their role, responsibilities and obligations. The stock exchange/clearing corporation shall also provide at least seven days of training to every public interest director each year. 6.3.6 In case of extension of the term of the public interest director or appointment of a new public interest director, the stock exchange/ clearing corporation shall apply to SEBI two months before the expiry of the term. In addition to the other requirements prescribed herein, the application for extension of term of the public interest director shall be accompanied ....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... week from the date of appointment. 6.8.2 In case any other official of the stock exchange/ clearing corporation is appointed on the governing board in addition to the Managing Director, the same shall be subject to the approval of shareholders and SEBI, in that order. 7. Statutory Committees: 7.1 In order to ensure effective oversight of the functioning of stock exchanges, SEBI, from time to time, through various circulars has mandated the formation of various committees by stock exchanges. A list of all such mandatory committees along with their new composition and function is placed under Annexure A to this circular. The list of mandatory committees for clearing corporations is placed under Annexure B to this circular. 7.2 The stock exchanges and clearing corporations shall form the respective committees in accordance with the composition prescribed therein and accordingly no approval from SEBI is required. The existing stock exchange / clearing house of a stock exchange and person who clears and settles trades of a recognized stock exchange shall submit a confirmation within three months from the date of this circular. The stock exchange and cleari....
X X X X Extracts X X X X
X X X X Extracts X X X X
....aring corporation shall be in accordance with the norms specified by SEBI. The compensation norms, in this regard, shall be as follows:- a) The variable pay component will not exceed one-third of total pay. b) 50% of the variable pay will be paid on a deferred basis after three years. c) ESOPs and other equity linked instruments in the stock exchange/ clearing corporation will not form part of the compensation for the key management personnel. d) The compensation policy will have malus ^A malus arrangement permits the stock exchange/clearing corporation to prevent vesting of all or part of the amount of a deferred remuneration. and clawback arrangements ^A clawback is a contractual agreement between the employee and the stock exchange/clearing corporation in which the employee agrees to return previously paid or vested remuneration to the stock exchange/clearing corporation under certain circumstances. 8.2 Apart from the above, the compensation policy of the stock exchange/ clearing corporation shall take into consideration the following: • financial condition / health of the stock exchange/ clearing corporation, â....
X X X X Extracts X X X X
X X X X Extracts X X X X
....g) investor protection, h) investor services, 9.4 The stock exchange /Clearing Corporation shall ensure that the regulatory departments viz., surveillance, inspection, risk management, default, investor protection, investor services etc, are sufficiently staffed with adequate number of persons having professional and relevant experience at all times. PART- D MISCELLANEOUS 10. Procedure for submitting amendments to Articles/Rules/Byelaws/ Regulations, etc, for SEBI's approval:- The amendments to the Memorandum, Articles of Association, Rules, bye-laws, Regulations (as may be applicable) etc., of the stock exchange/clearing corporation, in terms of SCRA, SCRR, other applicable provisions in this regard, shall be submitted to SEBI for approval, subsequent to the following. The proposed amendment/s shall first be approved by the governing board of the stock exchange/clearing corporation, followed by shareholders approval (wherever applicable), then published in the Gazette of India (wherever applicable) and the respective State and then shall be submitted to SEBI for approval. The proposal shall be accompanied by the minutes of the governing board, the sh....
X X X X Extracts X X X X
X X X X Extracts X X X X
.... a person who is an independent director on the board of a Bank or Financial Institution, which is in public sector or which either has no identifiable ultimate promoter or the ultimate promoter is in Public Sector or such Banks or Financial Institutions has well diversified shareholding, and it / its associate is a Clearing Member and / or Trading Member, the applicant will not be deemed to be Clearing Member and / or Trading Member or their associate for the purpose of Regulation 23(7). However, the appointment shall be subject to fulfilment of other requirements and satisfaction of SEBI. d) Further, a person who is an independent director on the board of the Public Limited Company whose other independent director(s) are also independent director in an entity, which is trading or clearing member, the person will not be deemed to be associate of trading member or clearing member subject to that Public Limited Company does not have any other association with trading member or clearing member. e) Recognised Stock Exchange and recognised clearing corporation, shall monitor and ensure the compliance of the Regulation 23(7) on continuous basis, to ensure that director....