Intermediaries_Jan21

Intermediaries_Jan21_2021
1 (1) These regulations may be called the Securities and Exchange Board of India (Intermediaries) Regulations, 2008.
1 (2) They shall come into force in relation to different classes of intermediaries on such dates as the Board may by notification in the Official Gazette appoint: Provided that the provisions of Chapters V and VI of these regulations shall come into force on the date of publication of these regulations in the Official Gazette.
2 (1) In these regulations , unless the context otherwise requires: -(a) “Act” means the Securities and Exchange Board of India Act, 1992 (15 of 1992);(b) “associate” means any person controlled, directly or indirectly, by the intermediary , or anyperson who controls, directly or indirectly, the intermediary , or any entity or person undercommon control with such intermediary , and where such intermediary is a natural person willinclude any relative of such intermediary and where such intermediary is a body corporate willinclude its group companies (as defined in the Monopolies and Restrictive Trade PracticesAct, 1969 (Act No. 54 of 1969) or any re-enactment thereof) or companies under the samemanagement;(c) “certificate” means a certificate of registration granted to an intermediary by the Board under the relevant regulations ;(d) “change of status or constitution”, in relation to an intermediary includes-(i) amalgamation, demerger, consolidation or any other kind of corporate restructuringfalling within the scope of section 391 of the Companies Act 1956 (1 of 1956) or thecorresponding provision of any other law for the time being in force or any agreement orarrangement which would have the effect of such corporate restructuring;(ii) any change in control of the intermediary ;(iii) any change in the legal status of the intermediary ;(e) “control”, in relation to an intermediary shall include the power to, directly or indirectly,control the management or policy decisions of such intermediary by person or persons actingindividually or in concert;(f) “Form” means a Form in Schedule I;(g) “ intermediary ” means a person mentioned in clauses (b) and (ba) of sub-section (2) ofsection 11 and sub-section (1) and (1A) of section 12 of the Act and includes an assetmanagement company in relation to the Securities and Exchange Board of India (MutualFunds) Regulations, 1996, a clearing member of a clearing corporation or clearing house 1[,foreign portfolio investors] and a trading member of a derivative segment 2[or currencyderivatives segment] of a stock exchange but does not include 3[***] foreign venture capitalinvestor, mutual fund, collective investment scheme and venture capital fund;(h) “inspecting authority” means one or more persons appointed by the Board to undertakeinspection of the books, accounts, records and documents of an intermediary in terms of sub-regulation (1) of regulation 17;(i) “principal officer” means any person who is responsible for the activities of an intermediary and includes-(i) proprietor, in the case of a proprietary concern;(ii) any partner, in the case of a partnership firm;(iii) whole time/executive director /managing director , in the case of a body corporate;(iv) trustee, in the case of a trust;(v) any key employee; and (vi)any person designated as a principal officer under therelevant regulations ;(j) “relevant regulations ” means any regulations made by the Board applicable to a class ofintermediaries;(k) “securities laws” means the Act, the Securities Contract (Regulations) Act 1956 (42 of1956), the Depositories Act,1996 (22 of 1996), and the rules and regulations made thereunder;(l) “schedule” means a schedule annexed to these regulations ;(m) “self regulatory organization” means an organization of a class of intermediaries dulyrecognised by or registered with the Board and includes a stock exchange 4[;]5[(n) “wilful defaulter” means any person who is categorized as a wilful defaulter by anybank or financial institution or consortium thereof, in accordance with the guidelineson wilful defaulters issued by the Reserve Bank of India and includes any personwhose director , promoter or principal officer is categorized as such.]
25 05.2016. thereto under the Act; or the Securities Contracts (Regulation) Act, 1956 (42 of 1956) or the Companies Act, 1956 (1 of 1956) or the Depositories Act, 1996 (22 of 1996) or under the rules or
3 (1) On and from the commencement of these regulations , an application, for grant of acertificate to act as an intermediary , shall be made to the Board in Form A of Schedule I withsuch additional information as required to be provided under the relevant regulations , and theapplication fee, as specified in the relevant regulations :Provided that the applicant seeking registration to act as a stock broker or sub-broker or atrading member or a clearing member or a depository participant shall make the applicationalong with such additional information through the stock exchange or through the clearingcorporation of which the applicant is a member or trading member or through the depository inwhich the applicant proposes to act as a participant, as the case may be:Provided further that on and from the date specified by the Board by a notification in theOfficial Gazette, an application for registration to act as an intermediary as may be specifiedby the Board , shall be made to the relevant self regulatory organization in Form A with suchadditional information and the application fee as specified in the relevant regulations .(2) The stock exchange, the clearing corporation, the depository or the specified selfregulatory organization, as the case may be, shall examine the eligibility of the applicant interms of these regulations , relevant regulations and the rules, regulations or bye-laws of theconcerned stock exchange, clearing corporation, depository or the self regulatory organizationand forward the application with the application fees to the Board along with itsrecommendation as early as possible but not later than thirty days of receipt of the completeapplication with the specified application fees.(3) Notwithstanding anything contained in sub-regulation (1), any application made by an intermediary prior to the commencement of these regulations in relation to such intermediary , containing such particulars or as near thereto as are specified in Form A and such additionalinformation as required under the relevant regulations which is pending with the Board , shallbe treated as an application made in pursuance of sub-regulation (1) and be dealt withaccordingly.(4) An intermediary , who was granted a certificate under the relevant regulations prior to thecommencement of these regulations in relation to such intermediary , may continue to act assuch, subject to the following –(a) where the certificate was granted for a specified period, an application for grant ofcertificate under sub-regulation (1) shall be made by the intermediary at least threemonths prior to the expiry of such period or three months prior to expiry of two yearsfrom the commencement of these regulations in relation to such intermediary , whicheveris earlier and if the intermediary fails to do so, it shall cease to act as an intermediary onand from the expiry of the aforementioned period;(b) where a certificate has been granted to an intermediary on a permanent basis, thecertificate may continue to be valid under these regulations subject to the condition thatthe intermediary shall, within two years of commencement of these regulations in relationto such intermediary , furnish the information in Form A to the Board and upload theinformation in Part I thereof on the website specified by the Board :Provided that the time specified in clause (b) may be extended by the Board up to aperiod of six months on sufficient reasons being shown by the intermediary .(5) An intermediary who has compiled with the provisions of clause (b) of sub-regulation (4),shall be deemed to have been granted certificate under these regulations , subject to thepayment of fees specified under the relevant regulations .(6) Subject to the provisions of the relevant regulations , an applicant or an intermediary as thecase may be may carry on the activities of one or more intermediaries only if it obtains a
4 (1) The information contained in Part I of Form A shall be disclosed to the public by uploadingsuch information on the website as specified by the Board:Provided that the other relevant information furnished by the intermediary in Part II of Form Awhich relates to commercial confidence and private information of the intermediary, may betreated as confidential by the Board.(2) Any material change in the information furnished or uploaded under these regulationsshall be updated by the intermediary promptly but not later than fifteen days of the occurrenceof such change.
5 (1) The Board may require the applicant to furnish further information or clarifications ,regarding matters relevant to the activity of such an intermediary or which may otherwise beconsidered necessary by the Board, to consider and dispose of the application.(2) The applicant shall furnish such information and clarification to the satisfaction of theBoard, within the time specified in this regard by the Board.
6 (1) While considering the application, the information furnished by the applicant and itseligibility, the Board may, if it so desires, verify the information by physical verification ofdocuments, office space, and inspect the availability of office space, infrastructure, andtechnological support which the applicant is required to have.(2) For the purpose under sub-regulation (1), the Board may appoint any person including anauditor.
7 (1) For considering the eligibility of the applicant and grant of certificate to such applicant , the Board shall take into account all matters which it deems relevant to the activities in thesecurities market, including but not limited to the following -(a) whether the applicant or any of its associates have in the past been refused certificate bythe Board and if so, the ground for such refusal;(b) whether the applicant , its directors or partners, or trustees, as the case may be or itsprincipal officer is involved in any pending litigation connected with the securities marketwhich has an adverse bearing on the business of the applicant or on development orfunctioning of the securities markets;(c ) whether the applicant satisfies the eligibility criteria and other requirements as specified inthese regulations and the relevant regulations;(d) whether the grant of a certificate to the applicant is in the interest of the investors and thedevelopment of the securities market.(2) Any application for grant of certificate:-(a) which is not complete in all respects and does not conform to the requirements in Form Aand the requirements specified in the relevant regulation;(b) which does not contain such additional information as required by the Board ;(c) which is incorrect, false or misleading in nature;(d) where the applicant is not in compliance with the eligibility requirements as set out underthese regulations or the relevant regulations;(e) where the applicant is not a ‘fit and proper person' as stated in Schedule II;(f) where the principal officer does not have the requisite qualification or experience asrequired under the relevant regulations;shall be rejected by the Board for reasons to be recorded by the Board in writing.(3) Before rejecting an application, the applicant shall be given an opportunity in writing tomake good the deficiencies within the time specified by the Board , for the purpose:Provided that where an application is rejected for the reason that it contains false ormisleading information, no such opportunity may be given and the applicant shall not makeany application for grant of certificate under these regulations or any other regulations for a
8 (1) The Board on being satisfied that the applicant is eligible, shall grant a certificate in theform specified in the relevant regulations and send an intimation to the applicant in thisregard:Provided that where a pending proceeding before the Board or any court or tribunal mayresult in the suspension or cancellation of the certificate, the Board may give a conditionalregistration.(2) When an intermediary, who has been granted a certificate and who has filed Form Aunder these regulations, wishes to commence a new activity which requires a separatecertificate under the relevant regulations, it shall, while seeking such certificate, not berequired to file Form A, and shall furnish to the Board only such additional information as
9 (1) Any certificate granted by the Board to an intermediary shall be subject to the followingconditions, namely:—(a) where the intermediary proposes to change its status or constitution, it shall obtain priorapproval of the Board for continuing to act as an intermediary after such change in status orconstitution;(b)it shall pay the applicable fees in accordance with the relevant regulations;it shall abide by the provisions of the securities laws and the directions, guidelines(c)and circulars as may be issued thereunder;(d) it shall continuously comply with the requirements of regulation 4;(e) it shall meet the eligibility criteria and other requirements specified in these regulationsand the relevant regulations:Provided that the Board may impose other conditions as it may deem fit in the interest ofinvestors or orderly development of the securities market or for regulation of the working ofthe intermediary and the intermediary shall comply with such conditions.(2) A request for prior approval, under clause (a) of sub regulation (1) which is complete in allrespects shall be disposed off by the Board within a period of sixty days from the date ofreceipt of such request and where the decision of the Board has not been communicated to the intermediary within the said period of sixty days, the prior approval shall be deemed to havebeen granted.(3) The request for prior approval under clause (a) of sub regulation (1) shall contain theinformation in Form A in respect of the intermediary after the proposed change in status orconstitution and the information under Part I of Form A shall be uploaded in the website
10 (1) Where an intermediary has failed to make an application under sub-regulation(4) of regulation 3 or where an existing intermediary has been refused grant of certificateunder these regulations, the intermediary shall:(a) forthwith cease to act as such intermediary ;(b) transfer its activities to another intermediary which has been granted a certificate forcarrying on such activity and allow its clients or investors to withdraw or transfer theirsecurities or funds held in its custody without any additional cost to such client or investor;(c) make provisions as regards liability incurred or assumed by the intermediary ;(d) take such other action, within the time period and in the manner, as may be required underthe relevant regulations or as may be directed by the Board.
10 (2) While refusing grant of certificate under these regulations to an intermediary, the Board may impose such conditions upon the intermediary as it deems fit for protection of investors
11 Subject to compliance with the provisions of the Act, these regulations and the relevant regulations, the certificate granted to an intermediary shall be permanent unless surrendered by the intermediary or suspended or cancelled in accordance with theseregulations.
12 (1) An intermediary shall provide the Board with a certificate of its compliance officer onthe 1stApril of each year certifying:(a) the compliance by the intermediary with all the obligations, responsibilities and thefulfillment of the eligibility criteria on a continuous basis under these regulations and therelevant regulations;(b) that all disclosures made in Form A and under the relevant regulations are true andcomplete.(2) Each intermediary shall prominently display a photocopy of the certificate at all its officesincluding branch offices.(3) The intermediary shall also prominently display the name and contact details of thecompliance officer to whom complaint may be made in the event of any investor grievance.
13 (1) The intermediary shall make endeavours to redress investor grievances promptly but not later than forty-five days of receipt thereof and when called upon by the Board to do so it shall redress the grievances of investors within the time specified by the Board.
13 (2) The intermediary shall maintain records regarding investor grievances received by it and redressal of such grievances.
13 (3) The intermediary shall at the end of each quarter of a Financial Year ending on 31st March upload information about the number of investor grievances received, redressed and those remaining unresolved beyond three months of the receipt thereof by the intermediary on the website specified by the Board.
14 (1) An intermediary shall appoint a compliance officer for monitoring the compliance by it ofthe requirements of the Act, rules, regulations, notifications, guidelines, circulars and ordersmade or issued by the Board or the Central Government, or the rules, regulations and bye-laws of the concerned stock exchanges, or the self regulatory organization, where applicable:Provided that the intermediary may not appoint compliance officer if it is not carrying on theactivity of the intermediary .(2) The compliance officer shall report to the intermediary or its board of directors , in writing,of any material non-compliance by the intermediary .
15 (1) An intermediary, its directors, officers, employees or key management personnel shall not render, directly or indirectly, any investment advice about any security in the publicly accessible media, whether real-time or non-real-time, unless a disclosure of its interest, direct or indirect, including its long or short position in the said security has been made, while rendering such advice. If an intermediary’s directors, officers, employees or key management personnel
15 (2) are rendering such advice, the intermediary shall ensure that while rendering such advice he discloses his interest, the interest of his dependent family members and that of the employer including employer’s long or short position in the said security.
15 (3) An intermediary shall not make a recommendation to any client or investor who may be expected to rely thereon to acquire, dispose of or retain any securities unless he has reasonable grounds to believe that the recommendation is suitable.
16 An intermediary and its directors, officers, employees and key management personnel shall
17 (1) Without prejudice to the provisions of section 11 and section 11C of the Act , the Board may appoint one or more persons as inspecting authority to undertake the inspection of the books, accounts, records including telephone records and electronic records and documents of an intermediary for any purpose, including the purposes as specified under sub-regulation (2).
17 (2) The purposes referred to in sub-regulation (1) may include:-(a) to ensure that the books of account, records including telephone records and electronicrecords and documents are being maintained in the manner required under the relevantregulations;(b) to ascertain whether adequate internal control systems, procedures and safeguards havebeen established and are being followed by the intermediary to fulfill its obligations under therelevant regulations;(c) to ascertain whether any circumstances exist which would render the intermediary unfit orineligible;(d) to ascertain whether the provisions of the securities laws and the directions or circularsissued thereunder are being complied with;(e) to inquire into the complaints received from investors, clients, other market participants orany other person on any matter having a bearing on the activities of the intermediary ;(f) to inquire suo motu into such matters as may be deemed fit in the interest of investors or thesecurities market.
18 (1) Before undertaking an inspection under regulation 17, the inspecting authority shall give a notice to the concerned intermediary: Provided that where the inspecting authority is satisfied that in the interest of the investors no such notice should be given , it may, for reasons to be recorded in writing, dispense with such notice.
18 (2) During the course of inspection, the intermediary shall be bound to discharge its obligations provided under regulation 19.
19 (1) It shall be the duty of every director, proprietor, partner, trustee, officer, employee and any agent of an intermediary which is being inspected, to produce to the inspecting authority such books, accounts, records including telephone records and electronic records and documents in his custody or control and furnish to the inspecting authority with such statements and information relating to its activities within such time as the inspecting authority may require.
19 (2) The intermediary shall allow the inspecting authority to have reasonable access to the premises occupied by such intermediary or by any other person on its behalf and also extend reasonable facility for examining any books, records including telephone records and electronic records and documents in the possession of the intermediary or any such other person and also provide copies of documents or other material which in the opinion of the inspecting authority are relevant for the purposes of the inspection.
19 (3) Without prejudice to the provisions of sub-section (3) of section 11 of the Act, the inspecting authority shall, in the course of inspection, be entitled to examine or record statements of any principal officer, director, trustee, partner, proprietor or employee of suchintermediary.
19 (4) It shall be the duty of every director, proprietor, trustee, partner, officer and employee of such intermediary to give to the inspecting authority all assistance which the inspecting
20 (1) The Board may appoint a qualified auditor to inspect the books of account or the affairs of an intermediary: Provided that the auditor so appointed shall have the same powers of the inspecting authority mentioned in regulation 17 and the obligation of the intermediary and its employees mentioned in regulation 19 shall be applicable to the inspection under thisregulation.shall have the meaning derived from section 226 of the Companies Act, 1956 (1 of 1956).
20 (2) The Board may appoint a qualified valuer or direct a qualified valuer to be appointed by the intermediary , if so considered necessary by the Board.
20 (3) The expenses of such audit under sub-regulation (1) or valuation under sub-regulation (2)
21 (1) The inspecting authority shall submit an inspection report including interim reports to the Board.
21 (2) On submission of the inspection report, the Board may take such action thereon as it may deem fit and appropriate. ACTION IN CASE OF DEFAULT AND MANNER OF SUSPENSION OR
22 In this Chapter unless the context otherwise requires, -(a) “date of receipt of reply” includes the date on which the noticee makes oral submissions, if any;(b) “designated authority” means an officer of the Board and includes a bench of such officersappointed under regulation 24;(c) “designated member” means the Chairman or a Whole Time Member of the Board designatedfor the purpose;6[(ca) “Executive Director” means an officer of the Board who is appointed as such by the Board;](d)
23 Where any person who has been granted a certificate of registration under the Act or regulations made thereunder, –(a) fails to comply with any conditions subject to which a certificate of registration has beengranted to him;(b) contravenes any of the provisions of the securities laws or directions, instructions or circularsissued thereunder;the Board may, without prejudice to any action under the securities laws or directions, instructionsor circulars issued thereunder, by order take such action in the manner provided under theseregulations.
24 7[(1) Where it appears to the designated member, that any person who has been granted a certificate of registration under the Act and regulations made thereunder has committed any default of the nature specified in regulation 23, the designated member may approve the initiation of proceedings under this Chapter against such person.(2) The Executive Director shall thereafter appoint an officer not below the rank of a Division Chief , asa designated authority :Provided that the executive director may, at his discretion, appoint a bench of three officers , each ofwhom shall not be below the rank of a Division Chief:Provided further that such bench shall be presided by the senior most amongst them and all thew.e.f. 21.11.20177 Substituted ibid. prior to substitution, the sub-regulation read as follows:“(1) Where it appears to the designated member, that any person who has been granted certificate of registrationunder the Act, regulations made thereunder has committed any default of the nature specified in regulation 23, he mayappoint an officer not below the rank of a Division Chief, as a designated authority :Provided that the designated member may, at his discretion, appoint a bench of three officers , each of whom shall notbe below the rank of a Division Chief: Provided further that such bench shall be presided by the senior most amongstthem and all the decisions or recommendations of such bench shall be by way of majority.”decisions or recommendations of such bench shall be by way of majority.]8[(3)] No officer who has conducted investigation or inspection in respect of the alleged violation shallbe appointed as a designated authority .
25 (1) The designated authority shall, if it finds reasonable grounds to do so, issue a notice to the concerned person requiring him to show cause as to why the certificate of registration granted to it, should not be suspended or cancelled or why any other action provided herein should not be taken.
25 (2) noticee indicating the provisions of the Act, rules , regulations, circulars or guidelines in respect of which the contravention is alleged to have taken place.
25 (3) making of the imputations and extracts of relevant portions of documents, reports containing the findings arrived at in an investigation or inspection, if any, carried out.
25 (4) The noticee shall be called upon to submit within a period to be specified in the notice, not exceeding twenty- one days from the date of service thereof, a written representation along with documentary evidence, if any, in support of the representation to the designated authority.” Every notice under sub-regulation (1) shall specify the contravention alleged to have been committed by the There shall be annexed to the notice issued under sub- regulation (1) copies of documents relied on in(7) If the noticee does not reply to the notice issued under sub-regulation (1) or fails to appear on thescheduled date of hearing and the designated authority is satisfied that sufficient opportunity has beengiven to the noticee, the designated authority may conclude the proceedings after recording the reasonsfor doing so, on the basis of the material available on record.]
21 Prior to omission, the regulation read as follows:
26 (1) The noticee shall submit to the designated authority its written representation within the period specified in the notice along with documentary evidence, if any, in support thereof: Provided that the designated authority may extend the time specified in the notice for sufficient grounds shown by the noticee and after recording reasons in writing.
26 (2) If the noticee does not reply to the show cause notice, the designated authority may proceed with the matter ex- parte recording the reasons for doing so and make recommendation as the case may be on the basis of material facts
27 (1) On receipt of the report containing the measures recommended by the designated authority, the designated member shall cause to forward a copy of the report submitted by the designated authority and call upon the noticee to make its submission, in writing, as to why the measures recommended by the designated authority or any other action as contemplated in these regulations, should not be taken.
27 (2) The noticee shall submit, within a period as specified in the notice, but not exceeding twenty-one days from the date of service thereof, a written submission, along with documentary evidence, if any, in support of the written submission: Provided that upon the request of the noticee, the designated member, after recording reasons, in writing may cause to extend the time specified for submitting reply to the notice.
27 (3) After considering the submission of the noticee, the designated member may if deemed fit, for reasons to be recorded by it in writing, remit the matter to the designated authority to enquire afresh or to further enquire and resubmit the report.
27 (4) The designated member may grant an opportunity of personal hearing where the designated authority has recommended cancelation of certificate of registration or the designated member is of the prima facie view that it is a fit case for cancellation of certificate of registration. of personal hearing if neither the designated authority has recommended cancelation of certificate of registration nor the designated member is of the prima facie view that it is a fit case for cancellation of certificate of registration.
27 (5) After considering the facts and circumstances of the case, material on record and the written submission, if any, the designated member shall endeavor to pass an appropriate order within one hundred and twenty days from the date of receipt of submissions under sub-regulation (2) or the date of personal hearing, whichever is later.]
28 (1) On receipt of the report recommending the measures from the designated authority, the designated member shall consider the same and issue a show cause notice to the noticee enclosing a copy of the report submitted by the designated authority calling upon the noticee to submit its written representation as to why the action, including passing of appropriate direction, as the designated member considers appropriate, should not be taken.
28 (2) The noticee may, within twenty one days of receipt of the notice send a reply to the designated member who may pass appropriate order after considering the reply, if any received from the noticee and providing the person with an opportunity of being heard, as expeditiously as possible and endeavour shall be made to pass the order within one hundred and twenty days from the date of receipt of reply of the notice or hearing.”(2) A copy of the order passed under this Chapter shall be sent to the noticee and also uploaded onthe website of the Board.
28 (3) regulatory organization, a copy of the order shall also be sent to the concerned stock exchange, clearing corporation, depository or self regulatory organization.
29 The designated member may pass a common order in respect of a number of noticees where the subject matter in question is substantially the same or similar in nature.
30 ( Every report made by a designated authority and every order passed by the designated member
31 (1) Any person, who has been granted a certificate of registration under the Act or the regulations made thereunder, desirous of giving up its activity and surrender the certificate, may make a request for such surrender to the Board and while disposing such request, the Board shall not be bound by the procedure specified in the foregoing provisions of this Chapter.
31 (2) While disposing a request under this regulation, the Board may require the concerned person to satisfy the Board the factors as it deems fit, including but not limited to the following -(a) the arrangements made by the person for maintenance and preservation of records andother documents required to be maintained under the relevant regulations;(b) redressal of investor grievances;(c) transfer of records, funds or securities of its clients;(d) the arrangements made by it for ensuring continuity of service to the clients;(e) defaults or pending action, if any.
31 (3) While accepting surrender, the Board may impose such conditions upon the person as it deems fit for protection of the investors or its clients or the securities market and such person shall comply
32 (1) On and from the date of debarment or suspension of the certificate, the concerned person shall-(a) not undertake any new assignment or contract or launch any new scheme and during theperiod of such debarment or suspension it shall cease to carry on any activity in respect ofwhich certificate had been granted;(b) allow its clients or investors to withdraw or transfer their securities or funds held in itscustody or withdraw any assignment given to it, without any additional cost to such client orinvestor;(c) make provisions as regards liability incurred or assumed by it;(d) takesuch other action including the action relating to any records or documents andsecurities or money of the investors that may be in custody or control of such person, withinthe time period and in the manner, as may be required under the relevant regulations or as maybe directed by the Board while passing order under this Chapter or otherwise.
32 (2) On and from the date of surrender or cancellation of the certificate, the concerned person shall-(a) return the certificate of registration so cancelled to the Board and shall not represent itselfto be a holder of certificate for carrying out the activity for which such certificate had beengranted;(b) cease to carry on any activity in respect of which the certificate had been granted;(c) transfer its activities to another person holding a valid certificate of registration to carry onsuch activity and allow its clients or investors to withdraw or transfer their securities or fundsheld in its custody or to withdraw any assignment given to it, without any additional cost tosuch client or investor;(d) make provisions as regards liability incurred or assumed by it;(e) take such other action including the action relating to any records or documents andsecurities or money of the investors that may be in custody or control of such person, withinthe time period and in the manner, as may be required under the relevant regulations or as maybe directed by the Board while passing order under this Chapter or otherwise.
33 The person aggrieved by an order under these regulations may prefer an appeal to the Securities Appellate Tribunal against such order in accordance with the provisions of section 15T of the Act
33A Situations when summary procedure to be followed. - Notwithstanding anything contained in these regulations, any proceedings initiated under Chapter III of the erstwhile Securities and Exchange Board of India (Procedure for Holding Enquiry by Enquiry Officer and Imposing Penalty) Regulations, 2002 (repealed vide notification No. LAD-NRO/GN/2008/11/126538 dated May 26, 2008) prior to the coming into force of these regulations, shall be disposed of in accordance with
33B Procedure to be followed under this chapter(1) The Chairman or member may appoint an officer of the Board , not below the rank of AssistantGeneral Manager or Assistant Legal Advisor for giving his recommendation after following theprocedure under this regulation in respect of the proceedings referred to in regulation 33A:Provided that in respect of the proceedings referred to in regulation 33A, if a representation isreceived from an intermediary to dispense with the procedure laid down in regulation 33B, the Chairman or the member may not appoint an officer of the Board under this sub-regulation andpass an appropriate order after considering the representation of the intermediary.(2)The officer appointed under sub-regulation (1) shall issue to the intermediary, againstwhom the proceedings are being held, a notice requiring the intermediary to make a writtensubmission in reply to the notice within such time, not exceeding fifteen days after the receipt ofthe notice, as may be specified in the notice:Provided that the officer may extend the time mentioned under sub-regulation (2) for sufficientreasons to be recorded in writing.If the intermediary fails to make a written submission to the notice within the period(3)specified in the notice, the officer shall, after considering the circumstances and in light of thematerial on record, submit a report to the Chairman or the member, as the case may be, and mayrecommend taking of any action under regulation 27 as he considers appropriate in thecircumstances of the case and shall give reasons for recommending such action.(4)If the intermediary makes submission within the said period, the officer shall, afterconsidering the submission so made, submit a report to the Chairman or the member, as the casemay be, and may recommend taking of any action under regulation 27 as he considers appropriatein the circumstances of the case and shall give reasons for recommending such action.(5) The Chairman or the member, as the case may be, after receipt of recommendations from theofficer under sub-regulation (3) or sub-regulation (4), shall pass such orders as he may deemappropriate.
33C Publication of order. - The Board shall issue a press release in respect of an order under this chapter in at least two newspapers of which at least one shall have nationwide circulation and shall also put the
33D (1) The Board may, exempt any person or class of persons from the operation of all or any of the provisions of these regulations for a period as may be specified but not exceeding twelve months, for furthering innovation in technological aspects relating to testing new products, processes, services, business models, etc. in live environment of regulatory sandbox in the securities markets .
33D (2) Any exemption granted by the Board under sub-regulation (1) shall be subject to the applicant satisfying such conditions as may be specified by the Board including conditions to be complied with on a continuousbasis.environment where new products, processes, services, business models, etc. may be deployed on a limitedset of eligible customers for a specified period of time, for furthering innovation in the securities market ,
34 (1) Any notice issued or order passed under these regulations may be served -(a) by hand delivery to the concerned person or his duly authorized agent; or(b) by delivery, at the address available on the records of the Board and addressed to that personor his duly authorized agent, by registered post acknowledgement due or by speed post or by suchcourier service or by electronic mail service or by any other means of transmission which affordsa record of delivery; or(c) in case of a stock broker or a sub-broker or a depository participant through the concernedstock exchange or the depository respectively; and(d) if it cannot be served as per clause (a) or (b) or (c), by affixing the same on the door or someother conspicuous part of the premises in which such person resides or is known to have lastresided or carries on business or is known to have last carried on business or personally works forgain or is known to have last personally worked for gain.
35 Without prejudice to any order under the securities laws and the directions, guidelines and circulars as may be issued thereunder including an order under Chapter V of these regulations the Board may in the interest of the securities market, in the interest of the investors or for the purpose of securing the proper management of any intermediary, issue, necessary direction including but not limited to any or all of the following -(a) directing the intermediary or other persons associated with securities market to refund anymoney or securities collected from the investors under any scheme or otherwise ,with orwithout interest;(b) directing the intermediary or other persons associated with securities market not to accessthe capital market or not to deal in securities for a particular period or not to associate with anyintermediary or with any capital market related activity;(c) directing the recognised stock exchange concerned not to permit trading in the securities orunits issued by a mutual fund or collective investment scheme;(d) directing the recognised stock exchange concerned to suspend trading in the securities orunits issued by a mutual fund or collective investment scheme;(e) any other direction which the Board may deem fit and proper in the circumstances of thecase:Provided that before issuing any directions the Board shall give a reasonable opportunity ofbeing heard to the persons concerned: Provided further that if the circumstances warrant anyinterim direction is required to be passed immediately, the Board shall give a reasonableopportunity of hearing to the persons concerned after passing the direction, without any unduedelay.
36 In order to remove any difficulties in the application or interpretation of these regulations, the Board may issue clarifications and guidelines in the form of circulars.
37 The regulations specified in the Schedule IV shall be amended in the manner and to the extent stated therein.
38 (1) With effect from publication of these regulations in the Official Gazette –(a) the Securities and Exchange Board of India (Procedure for Holding Enquiry by EnquiryOfficer and imposing Penalty) Regulations, 2002; and(b) the Securities and Exchange Board of India (Criteria for Fit and Proper Persons) Regulations,2004 shall be repealed.
38 (2) Notwithstanding such repeal, anything done or any action taken under those regulations including an enquiry commenced or notice issued under the Securities and Exchange Board of India (Procedure for Holding Enquiry by Enquiry Officer and imposing Penalty) Regulations, 2002, before the publication of these regulations in the Official Gazette, shall be deemed to have been done or taken or commenced under the corresponding provisions of these regulations.
38 (3) After the repeal of the regulations referred to in sub-regulation (1), any reference thereto in any regulation, guidelines, circulars shall be deemed to be a reference to Chapter V and Schedule II,respectively.SECURITIES AND EXCHANGE BOARD OFINDIA

Intermediaries_Jan21_2021

1 (1) These regulations may be called the Securities and Exchange Board of India (Intermediaries) Regulations, 2008.

1 (2) They shall come into force in relation to different classes of intermediaries on such dates as the Board may by notification in the Official Gazette appoint: Provided that the provisions of Chapters V and VI of these regulations shall come into force on the date of publication of these regulations in the Official Gazette.

2 (1) In these regulations , unless the context otherwise requires: -(a) “Act” means the Securities and Exchange Board of India Act, 1992 (15 of 1992);(b) “associate” means any person controlled, directly or indirectly, by the intermediary , or anyperson who controls, directly or indirectly, the intermediary , or any entity or person undercommon control with such intermediary , and where such intermediary is a natural person willinclude any relative of such intermediary and where such intermediary is a body corporate willinclude its group companies (as defined in the Monopolies and Restrictive Trade PracticesAct, 1969 (Act No. 54 of 1969) or any re-enactment thereof) or companies under the samemanagement;(c) “certificate” means a certificate of registration granted to an intermediary by the Board under the relevant regulations ;(d) “change of status or constitution”, in relation to an intermediary includes-(i) amalgamation, demerger, consolidation or any other kind of corporate restructuringfalling within the scope of section 391 of the Companies Act 1956 (1 of 1956) or thecorresponding provision of any other law for the time being in force or any agreement orarrangement which would have the effect of such corporate restructuring;(ii) any change in control of the intermediary ;(iii) any change in the legal status of the intermediary ;(e) “control”, in relation to an intermediary shall include the power to, directly or indirectly,control the management or policy decisions of such intermediary by person or persons actingindividually or in concert;(f) “Form” means a Form in Schedule I;(g) “ intermediary ” means a person mentioned in clauses (b) and (ba) of sub-section (2) ofsection 11 and sub-section (1) and (1A) of section 12 of the Act and includes an assetmanagement company in relation to the Securities and Exchange Board of India (MutualFunds) Regulations, 1996, a clearing member of a clearing corporation or clearing house 1[,foreign portfolio investors] and a trading member of a derivative segment 2[or currencyderivatives segment] of a stock exchange but does not include 3[***] foreign venture capitalinvestor, mutual fund, collective investment scheme and venture capital fund;(h) “inspecting authority” means one or more persons appointed by the Board to undertakeinspection of the books, accounts, records and documents of an intermediary in terms of sub-regulation (1) of regulation 17;(i) “principal officer” means any person who is responsible for the activities of an intermediary and includes-(i) proprietor, in the case of a proprietary concern;(ii) any partner, in the case of a partnership firm;(iii) whole time/executive director /managing director , in the case of a body corporate;(iv) trustee, in the case of a trust;(v) any key employee; and (vi)any person designated as a principal officer under therelevant regulations ;(j) “relevant regulations ” means any regulations made by the Board applicable to a class ofintermediaries;(k) “securities laws” means the Act, the Securities Contract (Regulations) Act 1956 (42 of1956), the Depositories Act,1996 (22 of 1996), and the rules and regulations made thereunder;(l) “schedule” means a schedule annexed to these regulations ;(m) “self regulatory organization” means an organization of a class of intermediaries dulyrecognised by or registered with the Board and includes a stock exchange 4[;]5[(n) “wilful defaulter” means any person who is categorized as a wilful defaulter by anybank or financial institution or consortium thereof, in accordance with the guidelineson wilful defaulters issued by the Reserve Bank of India and includes any personwhose director , promoter or principal officer is categorized as such.]

25 05.2016. thereto under the Act; or the Securities Contracts (Regulation) Act, 1956 (42 of 1956) or the Companies Act, 1956 (1 of 1956) or the Depositories Act, 1996 (22 of 1996) or under the rules or

3 (1) On and from the commencement of these regulations , an application, for grant of acertificate to act as an intermediary , shall be made to the Board in Form A of Schedule I withsuch additional information as required to be provided under the relevant regulations , and theapplication fee, as specified in the relevant regulations :Provided that the applicant seeking registration to act as a stock broker or sub-broker or atrading member or a clearing member or a depository participant shall make the applicationalong with such additional information through the stock exchange or through the clearingcorporation of which the applicant is a member or trading member or through the depository inwhich the applicant proposes to act as a participant, as the case may be:Provided further that on and from the date specified by the Board by a notification in theOfficial Gazette, an application for registration to act as an intermediary as may be specifiedby the Board , shall be made to the relevant self regulatory organization in Form A with suchadditional information and the application fee as specified in the relevant regulations .(2) The stock exchange, the clearing corporation, the depository or the specified selfregulatory organization, as the case may be, shall examine the eligibility of the applicant interms of these regulations , relevant regulations and the rules, regulations or bye-laws of theconcerned stock exchange, clearing corporation, depository or the self regulatory organizationand forward the application with the application fees to the Board along with itsrecommendation as early as possible but not later than thirty days of receipt of the completeapplication with the specified application fees.(3) Notwithstanding anything contained in sub-regulation (1), any application made by an intermediary prior to the commencement of these regulations in relation to such intermediary , containing such particulars or as near thereto as are specified in Form A and such additionalinformation as required under the relevant regulations which is pending with the Board , shallbe treated as an application made in pursuance of sub-regulation (1) and be dealt withaccordingly.(4) An intermediary , who was granted a certificate under the relevant regulations prior to thecommencement of these regulations in relation to such intermediary , may continue to act assuch, subject to the following –(a) where the certificate was granted for a specified period, an application for grant ofcertificate under sub-regulation (1) shall be made by the intermediary at least threemonths prior to the expiry of such period or three months prior to expiry of two yearsfrom the commencement of these regulations in relation to such intermediary , whicheveris earlier and if the intermediary fails to do so, it shall cease to act as an intermediary onand from the expiry of the aforementioned period;(b) where a certificate has been granted to an intermediary on a permanent basis, thecertificate may continue to be valid under these regulations subject to the condition thatthe intermediary shall, within two years of commencement of these regulations in relationto such intermediary , furnish the information in Form A to the Board and upload theinformation in Part I thereof on the website specified by the Board :Provided that the time specified in clause (b) may be extended by the Board up to aperiod of six months on sufficient reasons being shown by the intermediary .(5) An intermediary who has compiled with the provisions of clause (b) of sub-regulation (4),shall be deemed to have been granted certificate under these regulations , subject to thepayment of fees specified under the relevant regulations .(6) Subject to the provisions of the relevant regulations , an applicant or an intermediary as thecase may be may carry on the activities of one or more intermediaries only if it obtains a

4 (1) The information contained in Part I of Form A shall be disclosed to the public by uploadingsuch information on the website as specified by the Board:Provided that the other relevant information furnished by the intermediary in Part II of Form Awhich relates to commercial confidence and private information of the intermediary, may betreated as confidential by the Board.(2) Any material change in the information furnished or uploaded under these regulationsshall be updated by the intermediary promptly but not later than fifteen days of the occurrenceof such change.

5 (1) The Board may require the applicant to furnish further information or clarifications ,regarding matters relevant to the activity of such an intermediary or which may otherwise beconsidered necessary by the Board, to consider and dispose of the application.(2) The applicant shall furnish such information and clarification to the satisfaction of theBoard, within the time specified in this regard by the Board.

6 (1) While considering the application, the information furnished by the applicant and itseligibility, the Board may, if it so desires, verify the information by physical verification ofdocuments, office space, and inspect the availability of office space, infrastructure, andtechnological support which the applicant is required to have.(2) For the purpose under sub-regulation (1), the Board may appoint any person including anauditor.

7 (1) For considering the eligibility of the applicant and grant of certificate to such applicant , the Board shall take into account all matters which it deems relevant to the activities in thesecurities market, including but not limited to the following -(a) whether the applicant or any of its associates have in the past been refused certificate bythe Board and if so, the ground for such refusal;(b) whether the applicant , its directors or partners, or trustees, as the case may be or itsprincipal officer is involved in any pending litigation connected with the securities marketwhich has an adverse bearing on the business of the applicant or on development orfunctioning of the securities markets;(c ) whether the applicant satisfies the eligibility criteria and other requirements as specified inthese regulations and the relevant regulations;(d) whether the grant of a certificate to the applicant is in the interest of the investors and thedevelopment of the securities market.(2) Any application for grant of certificate:-(a) which is not complete in all respects and does not conform to the requirements in Form Aand the requirements specified in the relevant regulation;(b) which does not contain such additional information as required by the Board ;(c) which is incorrect, false or misleading in nature;(d) where the applicant is not in compliance with the eligibility requirements as set out underthese regulations or the relevant regulations;(e) where the applicant is not a ‘fit and proper person' as stated in Schedule II;(f) where the principal officer does not have the requisite qualification or experience asrequired under the relevant regulations;shall be rejected by the Board for reasons to be recorded by the Board in writing.(3) Before rejecting an application, the applicant shall be given an opportunity in writing tomake good the deficiencies within the time specified by the Board , for the purpose:Provided that where an application is rejected for the reason that it contains false ormisleading information, no such opportunity may be given and the applicant shall not makeany application for grant of certificate under these regulations or any other regulations for a

8 (1) The Board on being satisfied that the applicant is eligible, shall grant a certificate in theform specified in the relevant regulations and send an intimation to the applicant in thisregard:Provided that where a pending proceeding before the Board or any court or tribunal mayresult in the suspension or cancellation of the certificate, the Board may give a conditionalregistration.(2) When an intermediary, who has been granted a certificate and who has filed Form Aunder these regulations, wishes to commence a new activity which requires a separatecertificate under the relevant regulations, it shall, while seeking such certificate, not berequired to file Form A, and shall furnish to the Board only such additional information as

9 (1) Any certificate granted by the Board to an intermediary shall be subject to the followingconditions, namely:—(a) where the intermediary proposes to change its status or constitution, it shall obtain priorapproval of the Board for continuing to act as an intermediary after such change in status orconstitution;(b)it shall pay the applicable fees in accordance with the relevant regulations;it shall abide by the provisions of the securities laws and the directions, guidelines(c)and circulars as may be issued thereunder;(d) it shall continuously comply with the requirements of regulation 4;(e) it shall meet the eligibility criteria and other requirements specified in these regulationsand the relevant regulations:Provided that the Board may impose other conditions as it may deem fit in the interest ofinvestors or orderly development of the securities market or for regulation of the working ofthe intermediary and the intermediary shall comply with such conditions.(2) A request for prior approval, under clause (a) of sub regulation (1) which is complete in allrespects shall be disposed off by the Board within a period of sixty days from the date ofreceipt of such request and where the decision of the Board has not been communicated to the intermediary within the said period of sixty days, the prior approval shall be deemed to havebeen granted.(3) The request for prior approval under clause (a) of sub regulation (1) shall contain theinformation in Form A in respect of the intermediary after the proposed change in status orconstitution and the information under Part I of Form A shall be uploaded in the website

10 (1) Where an intermediary has failed to make an application under sub-regulation(4) of regulation 3 or where an existing intermediary has been refused grant of certificateunder these regulations, the intermediary shall:(a) forthwith cease to act as such intermediary ;(b) transfer its activities to another intermediary which has been granted a certificate forcarrying on such activity and allow its clients or investors to withdraw or transfer theirsecurities or funds held in its custody without any additional cost to such client or investor;(c) make provisions as regards liability incurred or assumed by the intermediary ;(d) take such other action, within the time period and in the manner, as may be required underthe relevant regulations or as may be directed by the Board.

10 (2) While refusing grant of certificate under these regulations to an intermediary, the Board may impose such conditions upon the intermediary as it deems fit for protection of investors

11 Subject to compliance with the provisions of the Act, these regulations and the relevant regulations, the certificate granted to an intermediary shall be permanent unless surrendered by the intermediary or suspended or cancelled in accordance with theseregulations.

12 (1) An intermediary shall provide the Board with a certificate of its compliance officer onthe 1stApril of each year certifying:(a) the compliance by the intermediary with all the obligations, responsibilities and thefulfillment of the eligibility criteria on a continuous basis under these regulations and therelevant regulations;(b) that all disclosures made in Form A and under the relevant regulations are true andcomplete.(2) Each intermediary shall prominently display a photocopy of the certificate at all its officesincluding branch offices.(3) The intermediary shall also prominently display the name and contact details of thecompliance officer to whom complaint may be made in the event of any investor grievance.

13 (1) The intermediary shall make endeavours to redress investor grievances promptly but not later than forty-five days of receipt thereof and when called upon by the Board to do so it shall redress the grievances of investors within the time specified by the Board.

13 (2) The intermediary shall maintain records regarding investor grievances received by it and redressal of such grievances.

13 (3) The intermediary shall at the end of each quarter of a Financial Year ending on 31st March upload information about the number of investor grievances received, redressed and those remaining unresolved beyond three months of the receipt thereof by the intermediary on the website specified by the Board.

14 (1) An intermediary shall appoint a compliance officer for monitoring the compliance by it ofthe requirements of the Act, rules, regulations, notifications, guidelines, circulars and ordersmade or issued by the Board or the Central Government, or the rules, regulations and bye-laws of the concerned stock exchanges, or the self regulatory organization, where applicable:Provided that the intermediary may not appoint compliance officer if it is not carrying on theactivity of the intermediary .(2) The compliance officer shall report to the intermediary or its board of directors , in writing,of any material non-compliance by the intermediary .

15 (1) An intermediary, its directors, officers, employees or key management personnel shall not render, directly or indirectly, any investment advice about any security in the publicly accessible media, whether real-time or non-real-time, unless a disclosure of its interest, direct or indirect, including its long or short position in the said security has been made, while rendering such advice. If an intermediary’s directors, officers, employees or key management personnel

15 (2) are rendering such advice, the intermediary shall ensure that while rendering such advice he discloses his interest, the interest of his dependent family members and that of the employer including employer’s long or short position in the said security.

15 (3) An intermediary shall not make a recommendation to any client or investor who may be expected to rely thereon to acquire, dispose of or retain any securities unless he has reasonable grounds to believe that the recommendation is suitable.

16 An intermediary and its directors, officers, employees and key management personnel shall

17 (1) Without prejudice to the provisions of section 11 and section 11C of the Act , the Board may appoint one or more persons as inspecting authority to undertake the inspection of the books, accounts, records including telephone records and electronic records and documents of an intermediary for any purpose, including the purposes as specified under sub-regulation (2).

17 (2) The purposes referred to in sub-regulation (1) may include:-(a) to ensure that the books of account, records including telephone records and electronicrecords and documents are being maintained in the manner required under the relevantregulations;(b) to ascertain whether adequate internal control systems, procedures and safeguards havebeen established and are being followed by the intermediary to fulfill its obligations under therelevant regulations;(c) to ascertain whether any circumstances exist which would render the intermediary unfit orineligible;(d) to ascertain whether the provisions of the securities laws and the directions or circularsissued thereunder are being complied with;(e) to inquire into the complaints received from investors, clients, other market participants orany other person on any matter having a bearing on the activities of the intermediary ;(f) to inquire suo motu into such matters as may be deemed fit in the interest of investors or thesecurities market.

18 (1) Before undertaking an inspection under regulation 17, the inspecting authority shall give a notice to the concerned intermediary: Provided that where the inspecting authority is satisfied that in the interest of the investors no such notice should be given , it may, for reasons to be recorded in writing, dispense with such notice.

18 (2) During the course of inspection, the intermediary shall be bound to discharge its obligations provided under regulation 19.

19 (1) It shall be the duty of every director, proprietor, partner, trustee, officer, employee and any agent of an intermediary which is being inspected, to produce to the inspecting authority such books, accounts, records including telephone records and electronic records and documents in his custody or control and furnish to the inspecting authority with such statements and information relating to its activities within such time as the inspecting authority may require.

19 (2) The intermediary shall allow the inspecting authority to have reasonable access to the premises occupied by such intermediary or by any other person on its behalf and also extend reasonable facility for examining any books, records including telephone records and electronic records and documents in the possession of the intermediary or any such other person and also provide copies of documents or other material which in the opinion of the inspecting authority are relevant for the purposes of the inspection.

19 (3) Without prejudice to the provisions of sub-section (3) of section 11 of the Act, the inspecting authority shall, in the course of inspection, be entitled to examine or record statements of any principal officer, director, trustee, partner, proprietor or employee of suchintermediary.

19 (4) It shall be the duty of every director, proprietor, trustee, partner, officer and employee of such intermediary to give to the inspecting authority all assistance which the inspecting

20 (1) The Board may appoint a qualified auditor to inspect the books of account or the affairs of an intermediary: Provided that the auditor so appointed shall have the same powers of the inspecting authority mentioned in regulation 17 and the obligation of the intermediary and its employees mentioned in regulation 19 shall be applicable to the inspection under thisregulation.shall have the meaning derived from section 226 of the Companies Act, 1956 (1 of 1956).

20 (2) The Board may appoint a qualified valuer or direct a qualified valuer to be appointed by the intermediary , if so considered necessary by the Board.

20 (3) The expenses of such audit under sub-regulation (1) or valuation under sub-regulation (2)

21 (1) The inspecting authority shall submit an inspection report including interim reports to the Board.

21 (2) On submission of the inspection report, the Board may take such action thereon as it may deem fit and appropriate. ACTION IN CASE OF DEFAULT AND MANNER OF SUSPENSION OR

22 In this Chapter unless the context otherwise requires, -(a) “date of receipt of reply” includes the date on which the noticee makes oral submissions, if any;(b) “designated authority” means an officer of the Board and includes a bench of such officersappointed under regulation 24;(c) “designated member” means the Chairman or a Whole Time Member of the Board designatedfor the purpose;6[(ca) “Executive Director” means an officer of the Board who is appointed as such by the Board;](d)

23 Where any person who has been granted a certificate of registration under the Act or regulations made thereunder, –(a) fails to comply with any conditions subject to which a certificate of registration has beengranted to him;(b) contravenes any of the provisions of the securities laws or directions, instructions or circularsissued thereunder;the Board may, without prejudice to any action under the securities laws or directions, instructionsor circulars issued thereunder, by order take such action in the manner provided under theseregulations.

24 7[(1) Where it appears to the designated member, that any person who has been granted a certificate of registration under the Act and regulations made thereunder has committed any default of the nature specified in regulation 23, the designated member may approve the initiation of proceedings under this Chapter against such person.(2) The Executive Director shall thereafter appoint an officer not below the rank of a Division Chief , asa designated authority :Provided that the executive director may, at his discretion, appoint a bench of three officers , each ofwhom shall not be below the rank of a Division Chief:Provided further that such bench shall be presided by the senior most amongst them and all thew.e.f. 21.11.20177 Substituted ibid. prior to substitution, the sub-regulation read as follows:“(1) Where it appears to the designated member, that any person who has been granted certificate of registrationunder the Act, regulations made thereunder has committed any default of the nature specified in regulation 23, he mayappoint an officer not below the rank of a Division Chief, as a designated authority :Provided that the designated member may, at his discretion, appoint a bench of three officers , each of whom shall notbe below the rank of a Division Chief: Provided further that such bench shall be presided by the senior most amongstthem and all the decisions or recommendations of such bench shall be by way of majority.”decisions or recommendations of such bench shall be by way of majority.]8[(3)] No officer who has conducted investigation or inspection in respect of the alleged violation shallbe appointed as a designated authority .

25 (1) The designated authority shall, if it finds reasonable grounds to do so, issue a notice to the concerned person requiring him to show cause as to why the certificate of registration granted to it, should not be suspended or cancelled or why any other action provided herein should not be taken.

25 (2) noticee indicating the provisions of the Act, rules , regulations, circulars or guidelines in respect of which the contravention is alleged to have taken place.

25 (3) making of the imputations and extracts of relevant portions of documents, reports containing the findings arrived at in an investigation or inspection, if any, carried out.

25 (4) The noticee shall be called upon to submit within a period to be specified in the notice, not exceeding twenty- one days from the date of service thereof, a written representation along with documentary evidence, if any, in support of the representation to the designated authority.” Every notice under sub-regulation (1) shall specify the contravention alleged to have been committed by the There shall be annexed to the notice issued under sub- regulation (1) copies of documents relied on in(7) If the noticee does not reply to the notice issued under sub-regulation (1) or fails to appear on thescheduled date of hearing and the designated authority is satisfied that sufficient opportunity has beengiven to the noticee, the designated authority may conclude the proceedings after recording the reasonsfor doing so, on the basis of the material available on record.]

21 Prior to omission, the regulation read as follows:

26 (1) The noticee shall submit to the designated authority its written representation within the period specified in the notice along with documentary evidence, if any, in support thereof: Provided that the designated authority may extend the time specified in the notice for sufficient grounds shown by the noticee and after recording reasons in writing.

26 (2) If the noticee does not reply to the show cause notice, the designated authority may proceed with the matter ex- parte recording the reasons for doing so and make recommendation as the case may be on the basis of material facts

27 (1) On receipt of the report containing the measures recommended by the designated authority, the designated member shall cause to forward a copy of the report submitted by the designated authority and call upon the noticee to make its submission, in writing, as to why the measures recommended by the designated authority or any other action as contemplated in these regulations, should not be taken.

27 (2) The noticee shall submit, within a period as specified in the notice, but not exceeding twenty-one days from the date of service thereof, a written submission, along with documentary evidence, if any, in support of the written submission: Provided that upon the request of the noticee, the designated member, after recording reasons, in writing may cause to extend the time specified for submitting reply to the notice.

27 (3) After considering the submission of the noticee, the designated member may if deemed fit, for reasons to be recorded by it in writing, remit the matter to the designated authority to enquire afresh or to further enquire and resubmit the report.

27 (4) The designated member may grant an opportunity of personal hearing where the designated authority has recommended cancelation of certificate of registration or the designated member is of the prima facie view that it is a fit case for cancellation of certificate of registration. of personal hearing if neither the designated authority has recommended cancelation of certificate of registration nor the designated member is of the prima facie view that it is a fit case for cancellation of certificate of registration.

27 (5) After considering the facts and circumstances of the case, material on record and the written submission, if any, the designated member shall endeavor to pass an appropriate order within one hundred and twenty days from the date of receipt of submissions under sub-regulation (2) or the date of personal hearing, whichever is later.]

28 (1) On receipt of the report recommending the measures from the designated authority, the designated member shall consider the same and issue a show cause notice to the noticee enclosing a copy of the report submitted by the designated authority calling upon the noticee to submit its written representation as to why the action, including passing of appropriate direction, as the designated member considers appropriate, should not be taken.

28 (2) The noticee may, within twenty one days of receipt of the notice send a reply to the designated member who may pass appropriate order after considering the reply, if any received from the noticee and providing the person with an opportunity of being heard, as expeditiously as possible and endeavour shall be made to pass the order within one hundred and twenty days from the date of receipt of reply of the notice or hearing.”(2) A copy of the order passed under this Chapter shall be sent to the noticee and also uploaded onthe website of the Board.

28 (3) regulatory organization, a copy of the order shall also be sent to the concerned stock exchange, clearing corporation, depository or self regulatory organization.

29 The designated member may pass a common order in respect of a number of noticees where the subject matter in question is substantially the same or similar in nature.

30 ( Every report made by a designated authority and every order passed by the designated member

31 (1) Any person, who has been granted a certificate of registration under the Act or the regulations made thereunder, desirous of giving up its activity and surrender the certificate, may make a request for such surrender to the Board and while disposing such request, the Board shall not be bound by the procedure specified in the foregoing provisions of this Chapter.

31 (2) While disposing a request under this regulation, the Board may require the concerned person to satisfy the Board the factors as it deems fit, including but not limited to the following -(a) the arrangements made by the person for maintenance and preservation of records andother documents required to be maintained under the relevant regulations;(b) redressal of investor grievances;(c) transfer of records, funds or securities of its clients;(d) the arrangements made by it for ensuring continuity of service to the clients;(e) defaults or pending action, if any.

31 (3) While accepting surrender, the Board may impose such conditions upon the person as it deems fit for protection of the investors or its clients or the securities market and such person shall comply

32 (1) On and from the date of debarment or suspension of the certificate, the concerned person shall-(a) not undertake any new assignment or contract or launch any new scheme and during theperiod of such debarment or suspension it shall cease to carry on any activity in respect ofwhich certificate had been granted;(b) allow its clients or investors to withdraw or transfer their securities or funds held in itscustody or withdraw any assignment given to it, without any additional cost to such client orinvestor;(c) make provisions as regards liability incurred or assumed by it;(d) takesuch other action including the action relating to any records or documents andsecurities or money of the investors that may be in custody or control of such person, withinthe time period and in the manner, as may be required under the relevant regulations or as maybe directed by the Board while passing order under this Chapter or otherwise.

32 (2) On and from the date of surrender or cancellation of the certificate, the concerned person shall-(a) return the certificate of registration so cancelled to the Board and shall not represent itselfto be a holder of certificate for carrying out the activity for which such certificate had beengranted;(b) cease to carry on any activity in respect of which the certificate had been granted;(c) transfer its activities to another person holding a valid certificate of registration to carry onsuch activity and allow its clients or investors to withdraw or transfer their securities or fundsheld in its custody or to withdraw any assignment given to it, without any additional cost tosuch client or investor;(d) make provisions as regards liability incurred or assumed by it;(e) take such other action including the action relating to any records or documents andsecurities or money of the investors that may be in custody or control of such person, withinthe time period and in the manner, as may be required under the relevant regulations or as maybe directed by the Board while passing order under this Chapter or otherwise.

33 The person aggrieved by an order under these regulations may prefer an appeal to the Securities Appellate Tribunal against such order in accordance with the provisions of section 15T of the Act

33A Situations when summary procedure to be followed. - Notwithstanding anything contained in these regulations, any proceedings initiated under Chapter III of the erstwhile Securities and Exchange Board of India (Procedure for Holding Enquiry by Enquiry Officer and Imposing Penalty) Regulations, 2002 (repealed vide notification No. LAD-NRO/GN/2008/11/126538 dated May 26, 2008) prior to the coming into force of these regulations, shall be disposed of in accordance with

33B Procedure to be followed under this chapter(1) The Chairman or member may appoint an officer of the Board , not below the rank of AssistantGeneral Manager or Assistant Legal Advisor for giving his recommendation after following theprocedure under this regulation in respect of the proceedings referred to in regulation 33A:Provided that in respect of the proceedings referred to in regulation 33A, if a representation isreceived from an intermediary to dispense with the procedure laid down in regulation 33B, the Chairman or the member may not appoint an officer of the Board under this sub-regulation andpass an appropriate order after considering the representation of the intermediary.(2)The officer appointed under sub-regulation (1) shall issue to the intermediary, againstwhom the proceedings are being held, a notice requiring the intermediary to make a writtensubmission in reply to the notice within such time, not exceeding fifteen days after the receipt ofthe notice, as may be specified in the notice:Provided that the officer may extend the time mentioned under sub-regulation (2) for sufficientreasons to be recorded in writing.If the intermediary fails to make a written submission to the notice within the period(3)specified in the notice, the officer shall, after considering the circumstances and in light of thematerial on record, submit a report to the Chairman or the member, as the case may be, and mayrecommend taking of any action under regulation 27 as he considers appropriate in thecircumstances of the case and shall give reasons for recommending such action.(4)If the intermediary makes submission within the said period, the officer shall, afterconsidering the submission so made, submit a report to the Chairman or the member, as the casemay be, and may recommend taking of any action under regulation 27 as he considers appropriatein the circumstances of the case and shall give reasons for recommending such action.(5) The Chairman or the member, as the case may be, after receipt of recommendations from theofficer under sub-regulation (3) or sub-regulation (4), shall pass such orders as he may deemappropriate.

33C Publication of order. - The Board shall issue a press release in respect of an order under this chapter in at least two newspapers of which at least one shall have nationwide circulation and shall also put the

33D (1) The Board may, exempt any person or class of persons from the operation of all or any of the provisions of these regulations for a period as may be specified but not exceeding twelve months, for furthering innovation in technological aspects relating to testing new products, processes, services, business models, etc. in live environment of regulatory sandbox in the securities markets .

33D (2) Any exemption granted by the Board under sub-regulation (1) shall be subject to the applicant satisfying such conditions as may be specified by the Board including conditions to be complied with on a continuousbasis.environment where new products, processes, services, business models, etc. may be deployed on a limitedset of eligible customers for a specified period of time, for furthering innovation in the securities market ,

34 (1) Any notice issued or order passed under these regulations may be served -(a) by hand delivery to the concerned person or his duly authorized agent; or(b) by delivery, at the address available on the records of the Board and addressed to that personor his duly authorized agent, by registered post acknowledgement due or by speed post or by suchcourier service or by electronic mail service or by any other means of transmission which affordsa record of delivery; or(c) in case of a stock broker or a sub-broker or a depository participant through the concernedstock exchange or the depository respectively; and(d) if it cannot be served as per clause (a) or (b) or (c), by affixing the same on the door or someother conspicuous part of the premises in which such person resides or is known to have lastresided or carries on business or is known to have last carried on business or personally works forgain or is known to have last personally worked for gain.

35 Without prejudice to any order under the securities laws and the directions, guidelines and circulars as may be issued thereunder including an order under Chapter V of these regulations the Board may in the interest of the securities market, in the interest of the investors or for the purpose of securing the proper management of any intermediary, issue, necessary direction including but not limited to any or all of the following -(a) directing the intermediary or other persons associated with securities market to refund anymoney or securities collected from the investors under any scheme or otherwise ,with orwithout interest;(b) directing the intermediary or other persons associated with securities market not to accessthe capital market or not to deal in securities for a particular period or not to associate with anyintermediary or with any capital market related activity;(c) directing the recognised stock exchange concerned not to permit trading in the securities orunits issued by a mutual fund or collective investment scheme;(d) directing the recognised stock exchange concerned to suspend trading in the securities orunits issued by a mutual fund or collective investment scheme;(e) any other direction which the Board may deem fit and proper in the circumstances of thecase:Provided that before issuing any directions the Board shall give a reasonable opportunity ofbeing heard to the persons concerned: Provided further that if the circumstances warrant anyinterim direction is required to be passed immediately, the Board shall give a reasonableopportunity of hearing to the persons concerned after passing the direction, without any unduedelay.

36 In order to remove any difficulties in the application or interpretation of these regulations, the Board may issue clarifications and guidelines in the form of circulars.

37 The regulations specified in the Schedule IV shall be amended in the manner and to the extent stated therein.

38 (1) With effect from publication of these regulations in the Official Gazette –(a) the Securities and Exchange Board of India (Procedure for Holding Enquiry by EnquiryOfficer and imposing Penalty) Regulations, 2002; and(b) the Securities and Exchange Board of India (Criteria for Fit and Proper Persons) Regulations,2004 shall be repealed.

38 (2) Notwithstanding such repeal, anything done or any action taken under those regulations including an enquiry commenced or notice issued under the Securities and Exchange Board of India (Procedure for Holding Enquiry by Enquiry Officer and imposing Penalty) Regulations, 2002, before the publication of these regulations in the Official Gazette, shall be deemed to have been done or taken or commenced under the corresponding provisions of these regulations.

38 (3) After the repeal of the regulations referred to in sub-regulation (1), any reference thereto in any regulation, guidelines, circulars shall be deemed to be a reference to Chapter V and Schedule II,respectively.SECURITIES AND EXCHANGE BOARD OFINDIA

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