SOP for payment of financial disincentives by Market Infrastructure Institutions
SEBI, vide circular dated October 14, 2024, has issued a corrigendum clarifying references to its September 20, 2024, circular regarding the payment of financial disincentives by Market Infrastructure Institutions ("MIIs") as a result of technical glitch. The amendments did not explicitly give reference to relevant sections of the Master Circular for commodity derivatives segment dated August 4, 2023 ("Master Circular"). Accordingly, SEBI has made references to the relevant sections of the Master Circular which are to be read with the relevant sections of the circular dated September 20, 2024. Further, the following is inserted in the Master Circular:
- SEBI, on identification of a technical glitch resulting into financial disincentive to the MIIs, or upon receipt of the information of any such instance, must provide an opportunity to the concerned MIIs to make their submissions;
- MIIs must carry out internal examination pertaining to occurrence of technical glitches to ascertain individual accountability and take appropriate action including suitable recording and reckoning in the performance appraisal of those individuals; and
- SEBI would retain the right to initiate enforcement action against the individuals at the MII, if there is sufficient ground to do so.
Monitoring shareholding of MIIs
SEBI, vide circular dated October 14, 2024, has introduced a framework to monitor the shareholding of MIIs. The framework includes the following measures:
- each MII must appoint a Designated Depository ("Depository") to monitor compliance with shareholding limits. The Depository must be independent of the MII;
- the prescribed framework for monitoring and ensuring compliance with shareholding norms currently applicable to listed stock exchanges and listed depositories will be applicable to all MIIs (i.e. both listed and unlisted);
- stock exchanges must ensure that trading members, their associates, and agents do not collectively own more than 49% of an MII's equity. Any acquisitions that increase total ownership to 45% require prior approval;
- stock exchanges must own at least 51% of clearing corporations. No exchange can own more than 15% of a single clearing corporation;
- MIIs must ensure that shareholders with 2% or more of their equity shares or voting rights meet the fit and proper criteria. MIIs must report non-compliance to SEBI quarterly;
- if a shareholding or fit and proper criteria breach occurs, SEBI will take action. This may include freezing voting rights, corporate benefits, and transferring dividends to the investor protection fund or settlement guarantee fund; and
- listed MIIs can divest excess shareholding through a special window provided by the stock exchange. Unlisted MIIs must follow SEBI's directions on a case-by-case basis.
The provisions of the circular come into force 90 (ninety) days from its date of issuance.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.