Executive Summary:
This circular, issued by SEBI on August 5, 2025, modifies the handling of review, appeal, or waiver of penalty requests within Market Infrastructure Institutions (MIIs). It distinguishes between actions taken by the Internal Committee (IC) of the Member Committee (MC) or as per pre-approved policy, and actions taken directly by the MC. The circular is effective 45 days from its issuance.
Key Points / Main Content:
* **Terms of Reference Modification:**
* The circular modifies Paragraph 2 regarding the handling of review, appeal, or waiver of penalty requests.
* **Handling of Requests:**
* Requests against actions by the IC of the MC or per pre-approved policy are placed before the MC.
* Requests against actions by the MC are handled by a mechanism set up by the Governing Board, including Public Interest Directors and/or Independent External Professionals not part of the MC.
* The Governing Board will issue Standard Operating Procedures (SOP) for handling these requests.
* Further appeals against MII decisions can be made to the appropriate authority based on applicable laws.
* **Implementation:**
* MIIs must implement necessary systems and amend bylaws/rules as needed.
* MIIs must notify market participants, including investors, and disseminate the circular on their website.
* **Legal Basis:**
* The circular is issued under Section 11(1) of the Securities and Exchange Board of India Act, 1992, and other relevant regulations.
Impact Analysis:
* **Recognized Stock Exchanges, Clearing Corporations, and Depositories (MIIs):**
* *Impact:* MIIs must modify their internal processes for handling requests for review, appeal, or waiver of penalties, based on whether the action was taken by the IC of the MC or by the MC itself.
* *Action Required:*
* Establish a mechanism via the Governing Board to handle requests against actions taken by the MC, as specified.
* Develop and issue Standard Operating Procedures (SOP) for this mechanism.
* Amend relevant bylaws, rules, and regulations as necessary.
* Implement necessary systems for compliance.
* Notify market participants and investors about these changes via their website.
* **Members/Participants of MIIs:**
* *Impact:* The process for appealing penalties is altered based on which body within the MII took the initial action.
* *Action Required:* Be aware of the new appeal mechanism, especially regarding actions taken directly by the MC, and the possibility of further appeals to appropriate authorities.
* **Investors:**
* *Impact:* Indirectly impacted through changes in how regulatory actions against market participants are reviewed and appealed, contributing to a more transparent and robust market.
* *Action Required:* Stay informed about the changes via MII websites.
Key Entities Referenced
Securities and Exchange Board of India (SEBI): The regulatory body for securities markets in India, responsible for protecting investors and promoting the development of the securities market. Mentioned as the issuer of the circular.
Stock Exchanges: Recognized entities involved in trading securities. The circular is addressed to all recognized Stock Exchanges.
Clearing Corporations: Recognized entities that facilitate the clearing and settlement of securities transactions. The circular is addressed to all recognized Clearing Corporations.
Depositories: Recognized entities that hold securities in electronic form. The circular is addressed to all Depositories.
Market Infrastructure Institutions (MIIs): Collective term referring to Stock Exchanges, Clearing Corporations, and Depositories.
Member Committee (MC): A committee within Market Infrastructure Institutions (MIIs) responsible for regulatory actions.
Secondary Market Advisory Committee of SEBI (SMAC): An advisory committee that provides feedback to SEBI regarding secondary market operations.
Securities and Exchange Board of India Act 1992: The primary law governing the functioning of the Securities and Exchange Board of India (SEBI).
CIRCULAR
SEBI/HO/MRD/POD-III/CIR/P/2025/112 August 05, 2025
To
All Recognized Stock Exchanges
All Recognized Clearing Corporations
All Depositories
Sir/Madam,
Subject: Review, Appeal or Waiver of penalty requests emanating out of actions
taken by the Member Committee
1. The Terms of Reference (ToR) of Statutory Committees of Stock Exchanges, Clearing
Corporations and Depositories (collectively referred as Market Infrastructure Institutions
(MIIs)) have been prescribed under Paragraph 2.2.2 of Chapter 6 of SEBI Master
Circular No. SEBI/HO/MRD-PoD2/CIR/P/2024/00181 dated December 30, 2024 for
“Stock Exchanges and Clearing Corporations” and under Paragraph 4.66(B) of Section-4
of SEBI Master Circular No. SEBI/HO/MRD/MRD-PoD-1/P/CIR/2024/168 dated
December 03, 2024 for “Depositories”.
2. One of the ToR of Member Committee (MC) of MIIs on Regulatory Actions states that:
“Any review, appeal or waiver of penalty filed shall be placed before MC for its
consideration.”
3. In order to further streamline the mechanism for handling of requests for review, appeal
or waiver of penalty, based on feedback received from MIIs and deliberations in the
Page 1 of 3Secondary Market Advisory Committee of SEBI (SMAC), the provision at Paragraph 2
above stands modified as under:
3.1. Any request for review, appeal or waiver of penalty filed against actions taken by the
Internal Committee (IC) of the Member Committee (MC), or against actions taken by
the MII as per pre-approved policy on regulatory action shall be placed before the MC
for its consideration.
3.2. Any request for review, appeal or waiver of penalty filed against actions taken by the
MC from the date of implementation of this circular shall be handled by a mechanism
setup by the Governing Board of the MII with Public Interest Directors and/or
Independent External Professionals not forming part of the MC. The Governing Board
shall issue the Standard Operating Procedure (SOP) with regard to handling of such
review, appeal or waiver of penalty requests, if any, emanating out of actions taken by
the MC.
3.3. For further appeal against the decisions emanating out of the appeal mechanism of the
MII, the members or participants would be free to approach appropriate authority
based on the applicable laws.
4. Applicability: The provisions of the circular shall be applicable from the 45th day of
issuance of the circular.
5. All MIIs are advised to:
5.1. take necessary steps and put in place necessary systems for implementation of the
above.
5.2. make necessary amendments to the relevant byelaws, rules and regulations, wherever
required, for the implementation of the above; and.
5.3. bring the provisions of this circular to the notice of the market participants (including
investors) and disseminate the same on their website.
Page 2 of 36. This circular is issued in exercise of the powers conferred under section 11(1) of the
Securities and Exchange Board of India Act 1992 read with Regulation 51 of the
Securities Contracts (Regulation) (Stock Exchanges and Clearing
Corporations) Regulations, 2018 and section 26(3) of the Depositories Act, 1996 read
with Regulation 97 of Securities and Exchange 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.
7. This circular is available on SEBI website at www.sebi.gov.in at “Legal Framework -
Circulars.”
Yours faithfully,
Hruda Ranjan Sahoo
Deputy General Manager
Tel. No. 022-26449586
Email: hrsahoo@sebi.gov.in
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