SEBI moots summary proceedings for speedier disposal of intermediary-led violations

Sebi proposes provisions for summary proceedings in intermediaries rules

The capital markets regulator has proposed reinstating summary proceedings to deal with violations done by intermediaries speedily.

Currently, such violations are dealt with under the procedure given under Section 30A under Chapter V of Intermediaries Regulations.

Summary proceedings, which was part of the previous SEBI (Procedure of Holding Enquiry by Enquiry Officer and Imposing Penalty), had been repealed in 2008 with the introduction of Intermediaries Regulations.

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Through a consultation paper released on July 16, the Securities and Exchange Board of India (Sebi) has proposed that this regulation be replaced with summary proceedings to enhance Sebi's ability to "ability to act swiftly in protecting the interest of investors and maintaining integrity, transparency and efficiency of the securities market".

Public comments and suggestions for the paper needs to be sent in by August 6, 2024.

The paper said, "There are certain cases of violations wherein it has been observed that the violations are obvious in nature or are either accepted by the Intermediary or need minimal documents or evidence to corroborate the facts." Such violations include non-payment of fees by intermediaries to keep their registration alive, failure to file periodic reports on a timely basis and failure to take membership with supervisory bodies such as Investment Adviser Administration and Supervision Body (IAASB).

For such violations, the current procedure could be time-consuming, inefficient and even non-uniform, the paper said.

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Summary proceedings would be faster and offer the intermediary a chance to make submissions on why adverse actions should not be taken against it.

The paper listed the violations that would be considered for summary proceedings. They include those given below:
1. expulsion as a member by stock exchange(s) or clearing corporation(s),
2.termination of depository agreements
3. claims of returns or performance which are not permitted by the Board
4. claims of returns or performance which are found to be false or misleading by the Board or an agency as may be specified by the SEBI (SEBI had issued a consultation paper on Performance Validation Agency (PVA) wherein it is proposed that, in future, PVA shall validate the claims of returns or performance by the intermediary),
5. non-payment of specified fees such as payment of fees for keeping the registration in force
6.intermediary not being traceable,
7. failure to submit periodic reports for three or such consecutive periods as may be specified by the SEBI,
8.cases where intermediary has admitted the violation.