Stock exchanges, MIIs to resolve whistleblower complaints within 60 days, use suptech; SEBI issues new governance guidelines

Whistleblower policy

MIIs are already required to have a whistleblower policy for directors and employees to report concerns and to ensure that this mechanism provides safeguards to such employees/directors.

The new guidelines are to further strengthen this. Other than setting up a timeline for resolving complaints, the whistleblower mechanism should now include a requirement that the audit committee receive, investigate and take appropriate action; and that the committee submit reports to the governing body of the MII on the complaints received and action taken at the end of each quarter.

On using regtech, suptech

SEBI has asked the MIIs to adopt these advanced technologies further strengthen their regulatory and supervision mechanisms; to help members/participants make online submissions and to develop ability to generate alerts/reports on such submissions; and disclose material information on their website.

Material information includes details of number of investor complaints or grievances received against its members or participants, resolved and pending for the past 3 financial years; and details of regulatory action taken against their members during the past three financial years.

Outsourcing norms

Many MIIs are dependent on third-party vendors for backoffice work. In the circular, SEBI has asked MIIs to have policies for appointment and monitoring of such back office vendors or outsourced agencies.

The policy should clearly outline the risks that may arise from these vendors/agencies and steps to eliminate or reduce such risks; and should define the minimum standards or thresholds in terms of quantitative and qualitative parameters that these vendors/agencies need to meet.

For Public Interest Directors

Public interest directors of MIIs are required to meet at least once in six months. Under the new guidelines, all PIDs must mandatorily attend these meetings and the agenda of the meetings should include review of compliance; review of adequacy of resources (financial and human) and review of corrective steps taken by the MII based on observations made during SEBI inspections.

The circular said, "In order to achieve the above objectives, PIDs may discuss with the concerned Vertical Heads or Key Management Personnel (KMPs) or any other personnel, as may be felt appropriate by the PIDs."

Other guidelines

MIIs have also been asked to formulate an internal SOP to take disciplinary action against KMPs for any non-compliance with regulatory provisions which includes the actions that may be initiated against such a KMP including stringent actions such as termination for repeated non-compliances.

MIIs will need to provide regular training to its directors, which is at least seven days long in a year. The circular said, "MIIs, in coordination with reputed institutions like National Institute of Securities Markets (NISM) or experts/professionals, shall organize either online or offline learning modules related to ongoing development in capital markets and regulatory space, major developments in other developed economies in related areas, overview of development of various RegTech and SupTech, etc. "