TaxTMI 
TaxTMI 
Securities and Exchange Board of India (Depositories and Participants) (Amendment) Regulations, 2023
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....stituted with the following, namely,- "(k) "key management personnel" shall include: i. any person appointed as the managing director or executive director; or ii. a person serving as head of any department or vertical and directly reports to the managing director or to the directors on the governing board of the depository; or iii. a person serving as head of a core function as specified under Fourth Schedule of these regulations; or iv. a person who stands higher in hierarchy to the head of any department(s) handling core function(s) in the depository; or v. reporting officials of key management personnel; or vi. any person defined as a "key managerial personnel" under the Companies Act, 2013; or vii. any other person who is key decision making authority at the level of the depository or its direct or indirect material subsidiaries, as identified by the managing director or its Nomination and Remuneration Committee: Provided that in the case of a subsidiary of a depository that is regulated by a financial sector regulator; the norms specified by such a regulator may be considered for determining as to whether the person at the subsidiary is designated as a key m....
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....such director(s) shall exercise the same powers as the other directors of the governing board." V. in regulation 25, i. in sub-regulation (1) and sub-regulation (7) the words "shareholder directors" shall be substituted with the words and symbol "non-independent directors". ii. in sub-regulation (2), the words "nominated by" shall be substituted with the words "appointed with the prior approval of". iii. in sub-regulation (3), a. the word "nominated" shall be substituted with the word "appointed" b. in the first proviso, the words "nominated" shall be substituted with the words "appointed with the prior approval of the Board" c. in the second proviso, the words "nominated" shall be substituted with the word "appointed" and the symbol "/" shall be substituted with the word "or". VI. in regulation 26, in sub-regulation (3), in second proviso, the words "of two terms not exceeding five years each" shall be substituted with the words "period of ten years". VII. in regulation 27, i. The heading shall be substituted with the following, namely,- "Code of Conduct for the governing board, directors, committee members and key management personnel" ii. sub-regulation (....
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....tion shall be inserted, namely,- "(3A) Investment Committee." vi. sub-regulation (4) shall be substituted with the following, namely,- "(4) The composition, quorum and functions of the committees under sub-regulation (2), (3) and (3A) shall be in the manner as specified by the Board from time to time." X. after regulation 30 and before regulation 31, the following regulation shall be inserted, namely,- "Grievance Redressal Panel 30A. Every depository shall have Grievance Redressal Panel(s) to resolve investor grievances which shall function in the manner as may be specified by the Board." XI. in regulation 31, after sub-regulation (4), the following sub-regulations shall be inserted, namely,- "(5) Every depository shall internally conduct annual evaluation of its performance and the performance of its statutory committees in such a manner as may be specified by the Board. (6) Every depository shall also appoint an independent external agency to evaluate its performance and the performance of its statutory committees within such periodicity and in such a manner as may be specified by the Board. (7) Every depository shall disclose, on their website, the agend....
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....ormation 83A. The Board may from time to time call for any information, documents or records from the depository or its governing board or any shareholder or applicant thereof and from depository participant." XVI. After Chapter IX and before Chapter X, the following Chapter shall be inserted namely, - "CHAPTER IX-A ENFORCEMENT Power to issue directions and levy penalty by the Board 91A. (1) Without prejudice to exercise of its powers under the provisions of the Act, Depositories Act, 1996 and rules and regulations made thereunder, the Board may, either suo moto or on receipt of any information or during pendency of any inspection, inquiry or investigation or on completion thereof, in the interest of public or trade or investors or the securities market, issue such directions as it deems fit, including but not limited to any or all of the following:─ (a) directing a person holding equity shares or rights over equity shares in a depository in contravention of these regulations to divest his holding, in such manner as may be specified in the direction; (b) directing transfer of any proceeds or securities to the Investor Protection Fund of a depository; (c) deb....
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....ository or the securities market as a result of the default; and (c) the repetitive nature of the default." XVII. regulation 94 shall stand omitted. XVIII. regulation 95 shall stand omitted. XIX. After regulation 96 and before regulation 97, the following shall be inserted namely,- "Power to relax the strict enforcement of the regulations. 96A (1) The Board may suo motu or upon an application made by a depository, for reasons recorded in writing, grant relaxation from the strict compliance of any of the provisions of these regulations subject to such conditions as the Board deems fit to impose in the interests of investors in securities and the securities market, if the Board is satisfied that : (a) the non-compliance is caused due to factors beyond the control of the entity; or (b) the requirement is procedural or technical in nature. (2) The depository making an application referred to under sub-regulation (1) shall pay a non-refundable fee of rupees one lakh payable by way of direct credit in the bank account through NEFT/ RTGS/ IMPS or online payment using the SEBI payment gateway or any other mode as may be specified by the Board from time to time." XX. in ....
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....or is appointed, whichever is earlier, only if the governing board does not meet the mandatory regulatory requirements on its composition." iii. in clause (IV), a. in the heading, the words "shareholder directors" shall be substituted with the words and symbol "non-independent directors." b. in sub-clause (1), the words "shareholder directors" shall be substituted with the words and symbol "non-independent directors". c. sub-clause (2) shall be substituted with the following, namely, - "(2) The manner of election, appointment, tenure, resignation, vacation, etc. of a non-independent director shall be governed by the provisions applicable to shareholder directors under the Companies Act, 2013, save as otherwise specifically provided under these Regulations or circulars issued thereunder." iv. after clause (V), the following sub-clause shall be inserted, namely,- "(VI.) The depository shall provide at least seven days of training to all directors each year." XXI. in Second Schedule, in Part-D, i. in clause 1(a), the words "not exceed one third of total pay" shall be substituted with the words "be within a range of 25% to 50% of total pay". ii. in cl....
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....its and support functions as it has the responsibility to own and manage risks associated with day to day operational activities. ii. the second line of defense comprises various oversight functions, i.e., regulatory, risk management and compliance teams, and iii. the third line of defense comprises the internal audit function. (j) ensure that the roles and responsibilities of management in relation to three lines of defense are clearly specified and understood and that all employees are responsible for the regulatory, risk management and compliance outcomes. (k) ensure a culture of effective communication and challenge (i.e., encourage alternate views or questions from individuals and groups) and value and respect it. (l) ensure that any new product, service, revenue stream is examined by the concerned department of the depository from the compliance and risk management perspectives in addition to normal viability issues before approving the same. (m) review periodically all existing products, services, revenue streams. (n) shall meet, without the presence of the managing director and any other executive director, chief regulatory officer or compliance officer, the c....
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.... of personal integrity, truthfulness, honesty and fortitude in discharge of their duties in order to inspire public confidence and not engage in acts discreditable to their responsibilities; (e) perform their duties in an independent and objective manner and avoid activities that may impair, or may appear to impair, their independence or objectivity or official duties; (f) perform their duties with a positive attitude and constructively support open communication, creativity, dedication, and compassion; (g) not engage in any act involving moral turpitude, dishonesty, fraud, deceit, or misrepresentation or any other act prejudicial to the administration of the depository; (h) promote greater awareness and understanding of ethical responsibilities; (i) in the conduct of their business, observe high standards of commercial honour and; just and equitable principles of trade; (j) in their conduct in business life be exemplary which may set a standard for others; (k) not use their position to give or get favours to or from the executive or administrative staff of the depository, technology or service providers and vendors or suppliers of the depository; (l) not commit any....
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....l be held in strict confidence, shall not be divulged to any third party and shall not be used in any manner except for the performance of their duties. (d) Directors shall call for information only as part of specific committees or as may be authorised by the governing board of depository. 5. Misuse of Position. Directors or committee members or key management personnel shall not use their position to obtain business or any pecuniary benefit in the organization for themselves or family members. B. Applicable to the Directors and Committee Members 1. Meetings and Minutes. The directors and committee members of the depository shall-- (a) not participate in discussions on any subject matter in which any conflict of interest exists or arises, whether pecuniary or otherwise, and in such cases the same shall be disclosed and recorded in the minutes of the meeting; (b) not encourage the circulation of agenda papers during the meeting, unless circumstances so require; (c) ensure that minutes are recorded to capture all points of opinion comprehensively; (d) offer their comments on the draft minutes and ensure that the same are incorporated in the final minutes; (e) i....
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....ll transactions or dealings in securities by the directors and their immediate relatives (as defined in Securities and Exchange Board of India (Prohibition of Insider Trading) Regulations, 2015) shall be disclosed to the governing board of the depository. (b) All directors shall also disclose the trading conducted by firms or corporate entities in which they hold twenty percent or more beneficial interest or hold a controlling interest, to the depository. (c) The details including time period for disclosures stated above shall be provided by the depository, provided that the time period for disclosure shall not be later than fifteen days of the transaction/ dealing. (d) Directors who are nominees of Government of India, its statutory bodies or Public Financial Institutions and are governed by their own codes shall be exempt from this requirement. C. Applicable to public interest directors (a) Public interest directors of the depositories shall endeavor to attend all the governing board meetings and they shall be liable to vacate office if they remain absent for three consecutive meetings of the governing board or do not attend seventy-five percent of the total meetings of....
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....anagement personnel (the heads of departments) to discuss important issues pertaining to depository (b) Key management personnel of the depository shall disclose on a periodic basis as determined by the depository (which could be monthly), all their dealings in securities, directly or indirectly, to the governing board or regulatory oversight committee or Compliance Officer of depository. (c) All transactions must be of an investment nature and not speculative in nature. Towards this end, all securities purchased must be held for a minimum period of sixty days before they are sold. In specific/ exceptional circumstances, however, sale can be effected anytime by obtaining pre-clearance from the compliance officer to waive this condition after recording in writing his satisfaction in this regard. Explanation. - "securities" for the purpose of this code shall not include mutual fund units." v. PART C shall be omitted vi. PART D shall be substituted with the following, namely-, "PART-D [See Regulation 17] Code of Conduct for Depositories A Depository shall: (a) always abide by the provisions of the Act, Depositories Act, 1996, any Rules or Regulations framed thereun....
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....zed securities; iii. IT infrastructure for core and critical functions; iv. Business continuity plan and disaster recovery operations; v. Cyber Security and cyber resilience framework. b. Vertical 2: Regulatory, compliance, risk management and investor grievances. i. Risk management; ii. Surveillance and investigation; iii. Participant registration; iv. Issuer or securities admission; v. Compliance; vi. Inspection; vii. Enforcement; viii. Arbitration and grievance redressal mechanism; ix. Investor protection and services. c. Vertical 3: Other Functions including Business Development. i. Sales; ii. Marketing; iii. Product Development; iv. Finance." BABITHA RAYUDU, Executive Director [ADVT.-III/4/Exty./667/2022-23] Footnote: 1. The Securities and Exchange Board of India (Depositories and Participants) Regulations, 2018 were published in the Gazette of India on October 3, 2018 vide No. No. SEBI/LAD-NRO/GN/2018/40. 2. The Securities and Exchange Board of India (Depositories and Participants) Regulations, 2018 were subsequently amended on, - a. 4th June, 2019 by the Securities and Exchange Board of India (Depositories and Participants) (Amendme....