Sebi Proposes Summary Proceedings for Intermediaries

Capital markets regulator Sebi has proposed adding "summary proceedings" to the intermediaries rules to address certain securities law violations by intermediaries more efficiently.

Sebi has released a consultation paper for public comment on these amendments to the Intermediaries Rules, 2008, with comments due by August 6.

Summary proceedings will allow intermediaries to present reasons why their actions should not lead to adverse outcomes. These proceedings were previously included in the Sebi (Procedure of Holding Enquiry by Enquiry Officer and Imposing Penalty) Regulations, 2002, but were repealed with the Intermediaries Regulations in 2008.

Sebi's consultation paper outlines provisions for identifying cases suitable for summary proceedings and detailing the summary procedure. The regulator aims to address clear-cut violations, which are either accepted by the intermediary or require minimal evidence, through a more streamlined process.

Common violations include intermediaries not paying fees to keep their registration active, leading to expired registrations that need cancellation, and repeated failure to submit periodic reports on time. The current process for addressing these violations under Chapter V of the Intermediaries Regulations is lengthy and inefficient.

Summary proceedings will apply to cases of expulsion by stock exchanges or clearing corporations, termination of depository agreements, false or misleading claims about returns or performance, and non-payment of required fees. They will also apply when an intermediary is untraceable, repeatedly fails to submit periodic reports, or admits to violations.

Under the proposed summary procedure, intermediaries will have 21 days to respond in writing to notices. The authority will aim to decide within 21 days of receiving the response or after the response period expires, with potential actions including cancellation or suspension of registration.

Orders will be sent to the intermediary, posted on Sebi's website, and sent to relevant stock exchanges, clearing corporations, depositories, or supervisory bodies for posting on their websites.

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