Sebi removes automatic disincentive for MDs, CTOs of MIIs in case of tech glitch

The circular added that the MIIs will also be given a chance to make a submission on the tech glitch before the imposition of the disincentive.

The market regulator has removed the financial disincentive imposed on the managing director (MD) and chief technology officer (CTO) of a market infrastructure institution when there is a technical glitch. MIIs include entities such as stock exchanges and depositories.

In a circular issued on September 20, the Securities and Exchange Board of India (Sebi) has said that the disincentive will now be restricted to the MIIs.

So  far, the standard operating procedure (SOP) in case of a technical glitch has meant an automatic trigger of a financial disincentive for the institution and the two senior management personnel. This has now been changed for ease of doing business.

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The circular added that the MIIs will also be given a chance to make a submission on the tech glitch before the imposition of the disincentive.

These changes have been made considering how the operations of MIIs are now increasingly systems and technology driven.

As the circular stated, "SEBI received recommendations/ references to review imposition of
Financial Disincentive on individuals from various fora like Committee on
“Strengthening Governance of Market Infrastructure Institutions”, Working Group on
Ease of Doing Business (EoDB) and Technical Advisory Committee (TAC) of SEBI.
Separately, MIIs had also jointly represented that such disincentives on individuals
may be reviewed for Ease of Doing Business of MIIs".

The circular added, "Pursuant to deliberations, it was noted that operations of MIIs are increasingly becoming system driven, with them operating constellation of IT systems (both software and hardware) having dependency on various vendors/ service providers. Further, the test for ascertaining any individual responsibility for a technical glitch would entail ascertaining if there have been any act of omission/commission, including if an MD/CTO did or did not ensure adequate oversight/resources/checks and balances to prevent such glitch reasonably and by definition such a test would require application of mind and assessment."

Accordingly, in line with discussions with the technical advisory committee (TAC) and other entities, the regulator has decided to restrict the imposition of existing financial disincentives to the institutions (MIIs) only.