TaxTMI 
TaxTMI 
Statutory Committees at Market Infrastructure Institutions (MIIs)
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.... 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. Taking into consideration the recommendations of the ISF of MIIs and subsequent deliber....
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....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 resolution. 5.4. The invitees, if any, to the meetings of the Committees shall not have any voting rights. 5.5. The casting vote in the meetings of the statutory committees shall be with the Chairperson of the committee. 5.6. The functions or terms of reference o....
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....s. 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. 7.7. The newly recognized stock exchange, clearing corporation and depository shall submit a confirmation to SEBI within three months from the date of their recognition regarding the formation and composition of statutory committees. 8. In view of the revised TOR of statutory committees at Annexure ....
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....njan 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 Committee (IC) under MC. c. Define the Standard Operating Procedure (SOP) for the IC, including the timelines to be followed by IC, its composition, standardize criteria to scrutinize, evaluate, accept and grounds for rejection of applications, and other associated aspects to ensure uniformity and consistency while dealing with applications or cases. For scenarios not cover....
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....riate 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 corporation shall work together to realise the assets of both the trading member and the clearing member. q. Admission or rejection of claims of client or trading members or clearing members over the assets of the defaulter or expelled member. (IV) On IPF related aspects: r. Recommendation in respect of the claims of clients of defaulter trading member to the Trustees of the IPF on whe....
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....ived 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 exchange. t. Framing, reviewing, implementing and monitoring SOP for imposing disciplinary actions against employees of stock exchange. u. Besides the above, it will also discharge the function as Nomination & Remuneration Committee under the Companies Act, 2013 and SEBI (LODR) Regulations, 2015 as amended from time to time. (II) Oversight Committees 9. Standing Committee on Technology (SCOT) a. Ensure the availability of required I....
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.... 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 new alerts based on learnings from past or ongoing cases, etc., as may be applicable to the relevant segments of the exchange. ii. Requests, received from members of stock exchange, for review of decision taken by stock exchange regarding annulment of trades and provide its recommendation within 30 days of receipt of request by the stock exchange. b. Listing of Securities: Oversight of admission of securities for trading, suspension, revocation, delisting, etc. c. Compliance: i. Oversee and m....
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....ternally 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 the Clearing Corporation. k. Review annually the performance of Product Advisory Committee (for Stock Exchanges with Commodities Derivatives segment) l. Oversee matters related to product design and review the design of the already approved and running contracts. 11. Risk Management Committee (RMC) a. Formulate a detailed Risk Management Framework (RMF) which shall be approved by the governing board of the stock exchange 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 mitigatio....
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....ation 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 warehouse, etc. could also be implemented through an IC under MC. e. Define the Standard Operating Procedure (SOP) for the ICs, including the timelines to be followed by ICs, its composition, standardize criteria to scrutinize, evaluate, accept and grounds for rejection of applications, and other associated aspects to ensure uniformity and consistency while dealing. / with applications or cases. For scenarios not covered in the SOP, ICs should seek approval of MC. f. Oversee the implementation of the SOP by the ICs, including its timelines, uniformity and consistency in approach, based on quarterly report submitted by ICs. MC shall continue to be responsible and accountable for the activities of the ICs. (II) On Regulatory ....
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.... 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 that of the stock exchange shall work together to realise the assets of both the clearing member and the trading member. s. Admission or rejection of claims against such members over the assets of the defaulter or expelled member. 2. Nomination and Remuneration Committee (NRC) (I) Governing Board & its Members related aspects: a. Scrutinising and interviewing applicants for selecting the MD of the clearing corporation. b. Adhering and developing a skill evaluation metrics to assess applications of new or existing PIDs and NIDs for their appointment and/or reappointment and recommending their names to the Governing Board. c. Ensuring at all times that the governing board comprises of directors with required skill set and expertis....
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....ng 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 & Remuneration Committee under the Companies Act, 2013 and SEBI (LODR) regulations, 2015 as amended from time to time. (II) Oversight Committees 3. Standing Committee on Technology (SCOT) a. Ensure availability of required IT infrastructure for core and critical functions under verticals for "Critical operations" and "Regulatory, compliance, risk management and investor grievances". b. Ensure existence of adequate Business Continuity Plan (BCP) and Disaster Recovery (DR) plans c. Ensuring sound and prudent policies, standards and procedures for managing technology risks and safeguard information assets in the clearing corporation. d. Review the implementation of technology risk management framework and strategy of clearing corporation. e. Monitor whether the technology ....
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....rom 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 and assess the clearing corporation against the PFMIs on an annual basis and submit a report to the governing board of the clearing corporation. b. Code of Conduct i. Lay down procedures for implementation of the code of conduct and prescribe the reporting formats for disclosures required under the code of conduct. ii. Oversee the compliance of the code of conduct by KMPs and members of statutory committees (except directors) iii. Review compliance with the provisions on "Code of Conduct & Institutional mechanism for prevention of Fraud or Market Abuse" of Chapter VI of SEBI Master Circular for Stock Exchanges and Clearing Corporations at least once in a financial year and also verify that the adequacy and operational effectiveness of the systems for internal control. iv. Periodically oversee the dealings in securities by KMPs and IEPs. ....
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....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 procedures. f. RMC shall coordinate with other committees. In case of overlap with activities of other committees, RMC may consider views of such committees. g. Monitor implementation of the RMF and also keep the governing board informed about implementation of the RMF and deviation, if any. h. Approve the Half-Yearly Risk report to be submitted by the Chief Risk Officer (CRiO) to SEBI and the governing board of the clearing corporation. i. Comply with the roles and responsibilities as provided under the Companies Act 2013 and the SEBI (Listing Obligation and Disclosure Requirement), Regulations, 2015. 6. Investment Committee (IC) a. Evaluate each investment and divestment proposals, whether requiring infusion of funds or otherwise, except treasury investments. b. Evaluate proposals of capital expenditure. c. Make detailed analysis of existing investments. d. Investment Committee can provide the recommendation along with rationale to the governing Bo....
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....ure 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 corresponding regulatory action, including penalty amount, if any, is standardised in the policy framed by MC or through a circular issued by depository or SEBI, If the same is delegated, quarterly report in this regard should be placed before MC by the IC. However, for scenarios which require immediate regulatory action, the depository shall inform the MC post imposition of such actions. j. Oversee the regulatory actions taken by IC, if delegated, including evaluating that no discretion has been exercised in the process. For any violation by IC, MC will be responsible and liable for the same. k. While imposing the regulatory measure, the Committee shall adopt a laid down process, 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. l. Any review, appeal or waiver of penalty filed shall be placed before MC for its consideration. (III) On IPF related aspects: m. Recommendation i....
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....aming 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 depository is working or reporting to an employee of any other company where the depository has invested and vice-versa. s. Ensure that hiring of consultants is based on a pre-defined SOP of the Depository. t. Framing, reviewing, implementing and monitoring SOP for imposing disciplinary actions against employees of depository. u. Besides the above, it will also discharge the function as Nomination & Remuneration Committee under the Co....
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.... overall cyber security posture and technology implementation at the depository 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 depository for necessary actions, if any. s. Such other matters as may be referred by the Governing Board of the depository and/or SEBI. 4. Regulatory Oversight Committee (ROC) Oversee the matters related to the following: a. Surveillance and Investigation: Oversight of market by generating and providing alerts to stock exchanges on off-market transfers, pledge and account opening/closure related aspects, generation of alerts and providing requisite information to FIU-IND/Depository Participants for Anti Money Laundering purposes, take necessary action of freezing/unfreezing of beneficiary accounts based upon orders passed by SEBI/stock exchanges/other statutory bodies, monitoring of shareholding for listed and unlisted MIIs as per norms specified by SEBI, appropriate action based on the findings arising out of periodic surveillance meetings, development of new alerts based on learnings from past or ongoi....
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....ved over a long period of time. iii. Ensuring that Depository takes pro-active actions in case of repeated nature of complaints against particular Depository Participants. g. Investor Protection and Services: i. Supervising the functioning of Investor Services Cell of the Depository. i. 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 depository's website. iii. Review the whistle blower policy based on feedback received. j. Review the fees and charges levied by a Depository including comments on its appropriateness, on a periodic basis as well as each time there is change. 5. Risk Management Committee (RMC) a. Formulate a detailed Risk Management Framework (RMF) which shall be approved by the governing board of the depository 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 p....