TaxTMI 
TaxTMI 
Statutory Committees at Market Infrastructure Institutions (MIIs)
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.... 2018") & Regulation 30 of Securities and Exchange Board of India (Depositories and Participants) Regulations, 2018 (hereinafter referred as "D&P Regulations, 2018"), inter alia, state that, MIIs shall have the following statutory committees: 2.1. Functional Committees: 2.1.1. Member Committee (MC) [SEBI Board in its meeting dated April 30, 2024 approved the amendment to Clause (a) of sub-regulation (2) of Regulation 29 of SECC Regulations, 2018 to change the name of "Member and Core Settlement Guarantee Fund Committee" to "Member Committee". Appropriate amendments to SECC Regulations, 2018 is being notified.] and 2.1.2. Nomination and Remuneration Committee (NRC) 2.2. Oversight Committees: 2.2.1. Standing Committee on Technology (SCOT) 2.2.2. Regulatory Oversight Committee (ROC) and 2.2.3. Risk Management Committee (RMC) 2.3. Investment Committee 3. Based on the recommendations of the Committee on Strengthening Governance of Market Infrastructure Institutions, the functions, composition and Terms of Reference (TOR) of the statutory committees of MIIs were further deliberated in the Industry Standards Forum (ISF) of MIIs. 4. Taki....
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.... Risk Management Committee (RMC) a. The Committee may include the MD, NIDs (other than Executive Director) and IEPs, along with PIDs. b. The Chief Risk Officer (CRiO) and CISO should be invitees to the meetings of the Committee. c. If a PID with expertise in risk management is present in the governing board, the committee may preferably be chaired by the said PID. 6. Investment Committee (IC) a. The Committee may include the MD, NIDs (other than Executive Director), IEPs, along with PIDs. 5.1.2. In any statutory committee, the total number of PIDs shall not be less than the total number of other members of the Committee (including IEPs) put together. In case of SCOT, the total number of PIDs shall not be less than the total number of other members of the Committee, excluding IEPs. 5.2. The Chairperson of each statutory committee at MII shall be a PID. 5.3. The voting on a resolution in the meetings of the statutory committees at MIIs shall be valid only when the number of PIDs that have casted their vote on such resolution is not less than the total number of other members put together who have casted their vote on such resolut....
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.... associated with the MII and its members. 7.3.2. MIIs shall frame the guidelines for appointment, tenure, code of conduct, etc., of IEPs. Extension of the tenure may be granted to IEPs at the expiry of the tenure, subject to performance review in the manner prescribed by SEBI for PIDs. 7.3.3. The maximum tenure limit of IEPs in a committee of MII shall be at par with that of PIDs, as prescribed under Regulation 24(3) of the SECC Regulations, 2018. 7.3.4. IEPs shall not use or act on any sensitive information received in capacity as a member of the statutory committee for obtaining any undue benefit. 7.4. The members of statutory committees shall abide by the code of conduct as applicable to them in terms of both SECC Regulations, 2018 and D&P Regulations, 2018. 7.5. In the interest of securities market, SEBI may suo moto nominate members on any statutory committee of the MIIs, if felt necessary. 7.6. MIIs shall devise an internal mechanism to obtain regular feedback, inputs, suggestions, etc. on regulatory, non-regulatory and operational matters from various stakeholders including trading members, clearing members and depository participants, investors, etc. 7.....
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....ange Board of India (Depositories and Participants) Regulations, 2018 to protect the interests of investors in securities and to promote the development of, and to regulate the securities market. 13. This circular is available on SEBI website at www.sebi.gov.in at "Legal Framework→ Circulars". Yours faithfully Hruda Ranjan Sahoo Deputy General Manager Market Regulation Department E-mail: [email protected] Ph. No: 022-26449586 ANNEXURE-A A. Terms of Reference for Statutory Committees of Stock Exchanges: S.N. Name of Committee Brief terms of reference (I) Functional Committees 7. Member Committee (MC) (I) On admission, transfer and surrender of membership/Withdrawal and Change in control a. Formulate the policy to scrutinize, evaluate, accept or reject applications for admission of members, transfer of membership and approve surrender of membership or withdrawal and Change in Control. b. The activities with regard to scrutinizing, evaluating, accepting or rejecting applications for admission, transfer surrender, withdrawal and change in control of membership can be implemented through an Internal Committ....
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....al justice' and 'Principle of proportionality'. The 'Principle of natural justice' may be extended by the MC/IC, as applicable. l. Any review, appeal or waiver of penalty filed shall be placed before MC for its consideration. (III) On Defaulter Members: m. Formulate the policy to realise all the assets, and deposits of the defaulter or expelled member and appropriate the same amongst various dues and claims against the defaulter or expelled member in accordance with the Rules, Byelaws, Regulations of the Stock Exchange and applicable regulatory provisions. n. The activities with regard to realization of assets and deposits of the defaulter or expelled member and appropriation of the same amongst various dues and claims against the defaulter or expelled member, etc. can be implemented through an Internal Committee (IC) under MC. o. Define the SOP for the IC, including the timelines to be followed by IC and its composition. For scenarios not covered in the SOP, IC should seek approval of MC. p. In the event both the trading member and the constituent clearing member are declared defaulter, then the MC of the stock exchange and that of the clearing co....
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....down the policy for compensation of KMPs in compliance with the compensation norms prescribed under SECC Regulations, 2018 and ensuring that the compensation paid to KMPs is as per the compensation policy. m. Framing performance review parameters for evaluation of KMPs including that of MD. n. Assess the performance of KMPs based on reports submitted by the functional heads/reporting authority, and observations, if any, received from SEBI, and submit such reports to the governing board every year. o. Determining the tenure of a KMP, other than a director, to be posted in a particular role within regulatory, compliance, risk management and investor grievance vertical. p. Determining and finalizing the Key Result Areas (KRAs) of all KMPs at the beginning of every year. Review the same in line with organization needs. q. Ensuring that no KMP reports to a non-KMP. (III) On other organisation level related aspects: r. Ensure that no employee of the stock exchange is working or reporting to an employee of any other company where the stock exchange has invested and vice-versa. s. Ensure that hiring of consultants is based on a pre-defined SOP of the stock exch....
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....ope of the system audit, cyber audit and VAPT of the stock exchange is broad and representative of all critical areas of the stock exchange. p. Monitoring the results of periodic cyber security and DR drills conducted by the stock exchange. q. Review and approve the report regarding overall cyber security posture and technology implementation at the stock exchange and submit to the governing board. Upon approval by the governing board, submit the report to SEBI. r. On the above areas, the Committee shall submit a report to the Governing Board of the stock exchange for necessary action, if any. s. Such other matters as may be referred by the Governing Board of stock exchange and/or SEBI. 10. Regulatory Oversight Committee (ROC) Oversee the matters related to the following: a. Surveillance and Investigation: i. Oversight of market through order and trade level alerts, security level alerts, processing of alerts, price band changes, rumour verifications, shifting of securities to trade for trade segment, action against listed companies as a part of Surveillance Action, detailed investigations undertaken, disciplinary actions, development of n....
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....laints remaining unresolved over long period of time, etc. iii. Ensuring that stock exchanges take pro-active actions in case of repeated nature of complaints against particular TMs. g. Investor Protection and Services: i. Supervising the functioning of Investors Services Cell of the stock exchange. ii. Approve the investment policy for Investor Service Fund (ISF) iii. Supervise ISF, including its utilization. h. Whistleblower Mechanism: i. Frame the Whistle Blower Policy to be approved by the governing board. ii. Communicate the whistle blower policy internally to all persons and display the same on the stock exchange website. iii. Review the whistle blower policy based on feedback received. i. Fees and Charges: i. Review the fees and charges levied by the exchange, including commenting on its appropriateness, on a periodic basis as well as each time there is change. ii. Review Liquidity Enhancement Scheme (LES) including reduction or waiver of transaction fees, etc., its justification and impact, j. Oversee contribution of the stock exchange towards Core Settlement Guarantee Fund (SGF) of....
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....mmittee (MC) (I) On admission, transfer and surrender of membership/Withdrawal/Change in control. a. Formulate the policy to scrutinize, evaluate, accept or reject applications for admission of members and transfer of membership and approve voluntary withdrawal of membership or withdrawal and Change in Control. b. The activities with regard to scrutinizing, evaluating, accepting or rejecting applications for admission, transfer surrender/withdrawal and change in control of membership can be implemented through an Internal Committee (IC) under MC. c. Also, in case of clearing corporations with commodity derivatives segment, the committee shall also look into: i. Approving the empanelment & cancellation of Warehouse Service Providers or Vault Service Providers or Assayers, accreditation of warehouse, etc. ii. Reviewing the continuous functioning, monitoring, and compliance of norms by Warehouse Service Providers, Vault Service Providers and assayers. d. The activities with regard to empanelment, cancellation, continuous functioning, monitoring and compliance by Warehouse Service Providers or Vault Service Providers or Assayers, accreditation of wareho....
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...., based on the 'Principles of natural justice' and 'Principle of proportionality'. The 'Principle of natural justice' may be extended by the MC/IC, as applicable. n. Any review, appeal or waiver of penalty filed shall be placed before MC for its consideration. (III) On Defaulter Members: o. Formulate the policy to realize the assets or deposits of defaulter or expelled member and appropriate the same amongst various dues and claims against the defaulter or expelled member in accordance with the Rules, Byelaws and Regulations of the clearing corporation and applicable regulatory provisions. p. The activities with regard to realization of assets, and deposits of the defaulter or expelled member and appropriation of the same amongst various dues and claims against the defaulter or expelled member, etc. can be implemented through an IC under MC. q. Define the SOP for the IC, including the timelines to be followed by IC and its composition. For scenarios not covered in the SOP, IC should seek approval of MC. r. In the event both the clearing member and the constituent trading member are declared defaulter, then the MC of the clearing corporation and tha....
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.... performance review parameters for evaluation of KMPs, including that of MD. n. Assess the performance of KMPs based on reports submitted by the functional heads/reporting authority, and observations, if any, received from SEBI, and submit such reports to the governing board every year. o. Determining the tenure of a KMP, other than a director, to be posted in a particular role within regulatory compliance, risk management and investor grievance vertical. p. Determining and finalizing the KRAs of all KMPs at the beginning of the year. Review the same in line with organizational needs. q. Ensuring that no KMP reports to a non-KMP. (III) On other organisation level related aspects: r. Ensure that no employee of the clearing corporation is working or reporting to an employee of any other company where the clearing corporation has invested and vice versa. s. Ensure that hiring of consultants is based on a pre-defined SOP of the clearing corporation. t. Framing, reviewing, implementing and monitoring SOP for imposing disciplinary actions against employees of clearing corporation. u. Besides the above, it will also discharge the function as Nomination & Re....
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.... critical areas of the clearing corporation. p. Monitoring the results of periodic cyber security and DR drills conducted by clearing corporations. q. Review and approve the report regarding overall cyber security posture and technology implementation at the Clearing Corporation and submit to the Governing Board. Upon approval by the governing board, submit the report to SEBI. r. On the above areas, the Committee shall submit a report to the Governing Board of the clearing corporation for necessary action, if any s. Such other matters as may be referred by the Governing Board of the Clearing Corporation and/or SEBI. 4. Regulatory Oversight Committee (ROC) Oversee the matters related to the following: a. Compliance: i. Oversee implementation and compliance with SECC Regulations, 2018 as amended from time to time and other applicable rules and regulations along with SEBI Circulars and other directions issued thereunder. ii. Review the observations arising from various SEBI inspections, ensuring its advisories and findings are appropriately and timely addressed, and reports to governing board on timely basis. iii. Monitor an....
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....riateness, on a periodic basis as well as each time there is change. h. Manage the Core Settlement Guarantee Fund (Core SGF) of the clearing corporation, including its investments as per norms laid down and ensure proper utilization of Core SGF. 5. Risk Management Committee (RMC) a. Formulate a detailed Risk Management Framework (RMF) which shall be approved by the governing board of the clearing corporation to ensure continuity of operation at all points of time. b. The RMF shall include the following: i. The framework for identification of internal and external risks; ii. Measures for risk mitigation including systems and processes for internal control and; iii. Business continuity plan. c. Monitor each risk associated with the functioning of the clearing corporation more specifically for functions under vertical 1 and 2. d. Review the RMF & risk mitigation measures at least once annually taking into account the changing industry dynamics and evolving complexity. e. Monitor and review enterprise-wide risk management plan and lay down procedures to inform governing board about the risk assessment and mitigation procedure....
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....I) On Regulatory Actions e. Ensure that the depository has detailed SOP and processes in place towards monitoring the activities of its members through inspections. f. Ensure that there is mechanism for monitoring of its members on various parameters including through adoption of technology and take necessary action for non-compliance. g. Formulate policy to deal with any disciplinary matters relating to various market participants i.e. the participants, clients, issuer or its registrar and transfer agent, clearing members, and other users. This shall include termination or disciplinary action against such constituents such as participants, suspending, expelling or imposing penalty on the participant, freezing the account of the participant, or issuer or its registrar and transfer agent, issuing warning letters etc. The policy should have an SOP for undertaking such actions. h. Based on the laid down policy, consider all cases of violations observed and impose appropriate regulatory measure on the constituents of the depositories. i. For enforcement against violations, where no discretion of MC is involved, the same could be delegated to an IC, provided correspo....
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....m including being key decision makers within the depository, other than those specifically provided under regulation 2(1)(k) of the SEBI (Depositories and Participants) Regulations, 2018. For identifying KMPs, one of the criteria should be, persons (including employees/consultants) drawing annual pay higher than any KMP(s). i. Review, at least once a year hierarchical set ups across the departments, in order to identify KMPs due to a change in role and responsibilities assigned to them. Such review should necessarily include, consultants reporting to the MD/CEO or ED. j. The appointment and removal of KMPs, other than resignations. k. Laying down policy for accountability of KMPs. Further, mapping legal and regulatory duties to the concerned position and Delegation of Power (DoP) at various levels l. Laying down the policy for compensation of KMPs in compliance with the compensation norms prescribed under D&P Regulations, 2018 and ensuring that the compensation paid to KMPs is as per the compensation policy. m. Framing performance review parameters for evaluation of KMPs, including that of MD. n. Assess the performance of KMPs based on reports submitted by th....
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....em, such as hanging or slowdown or breakdown etc. k. Ensure that transparency is maintained in disseminating information regarding slowdown or breakdown in the depository system and ensure the depository issue a press release specifying the reason for any such breakdown. l. Approve Root Cause Analysis (RCA) of any stoppage of depository system and report to the governing board and SEBI. m. Review the implementation of board approved cyber security and cyber resilience policy and its framework and ensure the existence of advanced cyber security and cyber resilience framework at the depository. n. Review the identification and classification process of critical assets based on their sensitivity and criticality for business operations, services and data management. o. Ensuring that the scope of the system audit, cyber audit and VAPT of the depository is broad and representative of all critical areas of the depository. p. Monitoring the results of periodic cyber security and DR drills conducted by depository. q. Review and approve the report regarding overall cyber security posture and technology implementation at the depository and submit to the Governing Board. U....
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....es at least once in a financial year and also verify the adequacy and operational effectiveness of the systems for internal control. iii. Periodically oversee the dealings in securities by KMPs and IEPs iv. Periodically oversee the trading conducted by firms or corporate entities in which the directors of the Depository hold twenty percent or more beneficial interest or hold a controlling interest. v. While monitoring trades by KMPs and members of statutory committees, ROC shall take into consideration sensitive information held by them as per structured digital database maintained by depository. e. Ensure the adequacy of resources dedicated to functions under verticals for "Critical operations" and "Regulatory, compliance, risk management and investor grievances". f. Grievance Redressal mechanism: i. Define policy and SOP for dealing with complaints, by Depository. ii. Review of complaint resolution process and status of redressal of grievances of demat account holders, depository participants, Issuers or RTAs with respect to depository operations. This shall include review of complaints remaining unresolved over a long period of ....