SECURITIES AND EXCHANGE BOARD OF INDIA (INTERMEDIARIES) REGULATIONS, 2008

No LAD-NRO/GN/2008/11/126538 – In exercise of the powers conferred by section 30 of the Securities and Exchange Board of India Act, 1992 (15 of 1992) the Board hereby makes the following regulations, namely: – 

CHAPTER I PRELIMINARY

Short title and commencement.

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

(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. 

Definitions.  

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 any person who controls, directly or indirectly, the intermediary, or any entity or person under common control with such intermediary, and where such intermediary is a natural person will include any relative of such intermediary and where such intermediary is a body corporate will include its group companies (as defined in the Monopolies and Restrictive Trade Practices Act, 1969 (Act No. 54 of 1969) or any re-enactment thereof) or companies under the same management; 

(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 restructuring falling within the scope of section 391 of the Companies Act 1956 (1 of 1956) or the corresponding provision of any other law for the time being in force or any agreement or arrangement which would have the effect of such corporate restructuring;

• any change in control of the intermediary;
• 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 acting individually 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) of section 11 and sub-section (1) and (1A) of section 12 of the Act and includes an asset management company in relation to the Securities and Exchange Board of India (Mutual Funds) 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 currency derivatives segment] of a stock exchange but does not include ³[***] foreign venture capital investor, mutual fund, collective investment scheme and venture capital fund;

(h) “inspecting authority” means one or more persons appointed by the Board to undertake inspection 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-

• proprietor, in the case of a proprietary concern;
• any partner, in the case of a partnership firm;
• whole time/executive director/managing director, in the case of a body corporate;
• trustee, in the case of a trust;
• any key employee; and
• any person designated as a principal officer under the relevant regulations;

(j) “relevant regulations” means any regulations made by the Board applicable to a class of intermediaries;

(k) “securities laws” means the Act, the Securities Contract (Regulations) Act 1956 (42 of 1956), 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 duly recognised by or registered with the Board and includes a stock exchange ^[3][4][;]

^[5][(n) “wilful defaulter” means any person who is categorized as a wilful defaulter by any bank or financial institution or consortium thereof, in accordance with the guidelines on wilful defaulters issued by the Reserve Bank of India and includes any person whose director, promoter or principal officer is categorized as such.]

(2) Words and expressions used and not defined in these regulations shall have the meaning assigned 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 regulations made thereunder.

CHAPTER II  REGISTRATION OF INTERMEDIARIES  

Application for grant of certificate.  

3. (1) On and from the commencement of these regulations, an application, for grant of a certificate to act as an intermediary, shall be made to the Board in Form A of Schedule I with such additional information as required to be provided under the relevant regulations, and the application fee, as specified in the relevant regulations:

Provided that the applicant seeking registration to act as a stock broker or subbroker or a trading member or a clearing member or a depository participant shall make the application along with such additional information through the stock exchange or through the clearing corporation of which the applicant is a member or trading member or through the depository in which 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 the Official Gazette, an application for registration to act as an intermediary as may be specified by the Board, shall be made to the relevant self regulatory organization in Form A with such additional information and the application fee as specified in the relevant regulations. 

(2) The stock exchange, the clearing corporation, the depository or the specified self regulatory organization, as the case may be, shall examine the eligibility of the applicant in terms of these regulations, relevant regulations and the rules, regulations or bye-laws of the concerned stock exchange, clearing corporation, depository or the self regulatory organization and forward the application with the application fees to the Board along with its recommendation as early as possible but not later than thirty days of receipt of the complete application 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 additional information as required under the relevant regulations which is pending with the Board, shall be treated as an application made in pursuance of subregulation (1) and be dealt with accordingly.

(4) An intermediary, who was granted a certificate under the relevant regulations prior to the commencement of these regulations in relation to such intermediary, may continue to act as such, subject to the following –

(a) where the certificate was granted for a specified period, an application for grant of certificate under sub-regulation (1) shall be made by the intermediary at least three months prior to the expiry of such period or three months prior to expiry of two years from the commencement of these regulations in relation to such intermediary, whichever is earlier and if the intermediary fails to do so, it shall cease to act as an intermediary on and from the expiry of the aforementioned period;

(b) where a certificate has been granted to an intermediary on a permanent basis, the certificate may continue to be valid under these regulations subject to the condition that the intermediary shall, within two years of commencement of these regulations in relation to such intermediary, furnish the information in Form A to the Board and upload the information 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 a period of six months on sufficient reasons being shown by the intermediary. 

(5) An intermediary who has compiled with the provisions of clause (b) of subregulation (4), shall be deemed to have been granted certificate under these regulations, subject to the payment of fees specified under the relevant regulations.

(6) Subject to the provisions of the relevant regulations, an applicant or an intermediary as the case may be may carry on the activities of one or more intermediaries only if it obtains a separate certificate to carry on each such activity.

Disclosure of information.  

4. (1) The information contained in Part I of Form A shall be disclosed to the public by uploading such information on the website as specified by the Board:

Provided that the other relevant information furnished by the intermediary in Part II of Form A which relates to commercial confidence and private information of the intermediary, may be treated as confidential by the Board. 

(2) Any material change in the information furnished or uploaded under these regulations shall be updated by the intermediary promptly but not later than fifteen days of the occurrence of such change.

Furnishing of information and clarification.  

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 be considered necessary by the Board, to consider and dispose of the application.

(2) The applicant shall furnish such information and clarification to the satisfaction of the Board, within the time specified in this regard by the Board.

Verification of information.  

6. (1) While considering the application, the information furnished by the applicant and its eligibility, the Board may, if it so desires, verify the information by physical verification of documents, office space, and inspect the availability of office space, infrastructure, and technological support which the applicant is required to have.

(2) For the purpose under sub-regulation (1), the Board may appoint any person including an auditor.

Consideration of application.  

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 the securities market, including but not limited to the following –

(a) whether the applicant or any of its associates have in the past been refused certificate by the 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 its principal officer is involved in any pending litigation connected with the securities market which has an adverse bearing on the business of the applicant or on development or functioning of the securities markets;

(c) whether the applicant satisfies the eligibility criteria and other requirements as specified in these regulations and the relevant regulations;

(d) whether the grant of a certificate to the applicant is in the interest of the investors and the development 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 A and 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 under these 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 as required 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 to make 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 or misleading information, no such opportunity may be given and the applicant shall not make any application for grant of certificate under these regulations or any other regulations for a period of one year from the date of such rejection. 

Procedure for grant of certificate.  

8. (1) The Board on being satisfied that the applicant is eligible, shall grant a certificate in the form specified in the relevant regulations and send an intimation to the applicant in this regard:

Provided that where a pending proceeding before the Board or any court or tribunal may result in the suspension or cancellation of the certificate, the Board may give a conditional registration. 

(2) When an intermediary, who has been granted a certificate and who has filed Form A under these regulations, wishes to commence a new activity which requires a separate certificate under the relevant regulations, it shall, while seeking such certificate, not be required to file Form A, and shall furnish to the Board only such additional information as is required under the relevant regulations.

Conditions of certificate.  

9. (1) Any certificate granted by the Board to an intermediary shall be subject to the following conditions, namely:—

(a) where the intermediary proposes to change its status or constitution, it shall obtain prior approval of the Board for continuing to act as an intermediary after such change in status or constitution;

(b) it shall pay the applicable fees in accordance with the relevant regulations;

(c) it shall abide by the provisions of the securities laws and the directions, guidelines 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 regulations and the relevant regulations:

Provided that the Board may impose other conditions as it may deem fit in the interest of investors or orderly development of the securities market or for regulation of the working of the 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 all respects shall be disposed off by the Board within a period of sixty days from the date of receipt 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 have been granted.

(3) The request for prior approval under clause (a) of sub regulation (1) shall contain the information in Form A in respect of the intermediary after the proposed change in status or constitution and the information under Part I of Form A shall be uploaded in the website specified by the Board.

Effect of refusal to grant certificate or expiry of certificate.  

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 certificate under 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 for carrying on such activity and allow its clients or investors to withdraw or transfer their securities 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 under the relevant regulations or as may be directed by the Board. 

(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 or clients of the intermediary or the securities market and such conditions shall be complied with.

Period of validity of certificate.  

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 these regulations.

CHAPTER III  GENERAL OBLIGATIONS OF INTERMEDIARIES  

General obligations.  

12. (1) An intermediary shall provide the Board with a certificate of its compliance officer on the 1st April of each year certifying: 

(a) the compliance by the intermediary with all the obligations, responsibilities and the fulfillment of the eligibility criteria on a continuous basis under these regulations and the relevant regulations;

(b) that all disclosures made in Form A and under the relevant regulations are true and complete.

(c) Each intermediary shall prominently display a photocopy of the certificate at all its offices including branch offices.

(d) The intermediary shall also prominently display the name and contact details of the compliance officer to whom complaint may be made in the event of any investor grievance.

(e) The intermediary shall maintain such books, accounts and records as specified in the relevant regulations.

Redressal of investor grievances.  

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.

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

(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. 

Appointment of compliance officer.  

14. (1) An intermediary shall appoint a compliance officer for monitoring the compliance by it of the requirements of the Act, rules, regulations, notifications, guidelines, circulars and orders made 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 the activity 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.

Investment advice.  

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.

(2) If an intermediary’s directors, officers, employees or key management personnel 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.

(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.

Code of conduct.  

16. An intermediary and its directors, officers, employees and key management personnel shall continuously abide by the code of conduct specified in Schedule III.

CHAPTER IV  INSPECTION AND DISCIPLINARY PROCEEDINGS  

Right of inspection by the Board.  

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).

(2) The purposes referred to in sub-regulation (1) may include:-

(a) to ensure that the books of account, records including telephone records and electronic records and documents are being maintained in the manner required under the relevant regulations;

(b) to ascertain whether adequate internal control systems, procedures and safeguards have been established and are being followed by the intermediary to fulfill its obligations under the relevant regulations;

(c) to ascertain whether any circumstances exist which would render the intermediary unfit or ineligible;

(d) to ascertain whether the provisions of the securities laws and the directions or circulars issued thereunder are being complied with;

(e) to inquire into the complaints received from investors, clients, other market participants or any 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 the securities market.

Notice before inspection. 

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. 

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

Obligations of Intermediary on inspection.  

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.

(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.

(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 such intermediary.

(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 authority may reasonably require in connection with the inspection.

Appointment of auditor or valuer.  

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 this regulation. 

Explanation: For the purpose of this sub-regulation, the expression ‘qualified auditor’ shall have the meaning derived from section 226 of the Companies Act, 1956 (1 of 1956). 

(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.

(3) The expenses of such audit under sub-regulation (1) or valuation under subregulation (2) shall be borne by the intermediary.

Submission of report to the Board.  

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

(2) On submission of the inspection report, the Board may take such action thereon as it may deem fit and appropriate. 

CHAPTER V  

ACTION IN CASE OF DEFAULT AND MANNER OF SUSPENSION OR CANCELLATION OF CERTIFICATE  

Definitions.  

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 officers appointed under regulation 24; 

⁶[(c) “competent authority” means a Whole Time Member or an officer of the Board, not below the rank of a Chief General Manager, as may be designated for the purpose by the Board;] 

⁷[(ca) “Executive Director” means an officer of the Board who is appointed as such by the Board;]

(d)  “noticee” means the person to whom a notice has been issued under this Chapter. 

Cancellation or suspension of registration and other actions.  

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 been granted to him;

(b) contravenes any of the provisions of the securities laws or directions, instructions or circulars issued thereunder;

the Board may, without prejudice to any action under the securities laws or directions, instructions or circulars issued thereunder, by order take such action in the manner provided under these regulations. 

Appointment of designated authority.  

24. ⁸[(1) ⁹[The Board may approve the initiation of proceedings for any default of the nature specified in regulation 23 against any person who has been granted a certificate of registration under the Act and regulations made thereunder.]

(2) The Executive Director shall thereafter appoint an officer not below the rank of a Division Chief, as a designated authority: 

Provided that the executive director may, at his discretion, appoint a bench of three officers, each of whom 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 the decisions or recommendations of such bench shall be by way of majority.]

¹⁰[(3)] No officer who has conducted investigation or inspection in respect of the alleged violation shall be appointed as a designated authority. 

¹¹[Holding of enquiry 

25. (1) The designated authority shall issue a notice to a person against whom an enquiry has been initiated, to show cause as to why the action, as contemplated against such person should not be recommended.

(2) 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 reply to the notice, along with documentary evidence, if any, in support of such written reply:

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.

(3) Every notice issued under sub-regulation (1) shall specify the contravention alleged to have been committed by the noticee by indicating the provisions of the securities laws or the direction or the order of the Board alleged to have been contravened.

(4) There shall be annexed to the notice issued under sub- regulation (1), copies of documents relied upon by the Board along with the extracts of relevant portions of the reports containing the findings arrived at in an inquiry, investigation or inspection, if any.

(5) If the noticee demands inspection of such documents within the period specified in sub-regulation (2) and the designated authority is of the opinion that the same may be granted, then the designated authority may issue or cause to issue a notice fixing a date for inspection of documents:

Provided that the date for inspection of documents shall be within thirty days from the date of receipt of such request.

(6) The designated authority shall grant an opportunity of personal hearing and issue or cause to issue a notice scheduling a date for hearing the noticee:

Provided that no opportunity of personal hearing may be granted in the cases where the noticee is alleged to have failed to pay the registration fee or any other applicable fees to the Board as per the provisions of the relevant regulations or the noticee has been declared a wilful defaulter or a fugitive economic offender.

(7) If the noticee does not reply to the notice issued under sub-regulation (1) or fails to appear on the scheduled date of hearing and the designated authority is satisfied that sufficient opportunity has been given to the noticee, the designated authority may conclude the proceedings after recording the reasons for doing so, on the basis of the material available on record.]

 ¹²[Recommendation of action 

26. (1) After considering the material available on record and the reply, if any, the designated authority may by way of a report, recommend the following measures,–

(i) disposing of the proceedings without any adverse action;

(ii) cancellation of the certificate of registration;

(iii) suspension of the certificate of registration for a specified period;

(iv) prohibition of the noticee from taking up any new assignment or contract or launching a new scheme for such the period as may be specified;

(v) debarment of an officer of the noticee from being employed or associated with any registered intermediary or other person associated with the securities market for such period as may be specified;

(vi) debarment of a branch or an office of the noticee from carrying out activities for such period as may be specified;

(vi) issuance of a regulatory censure to the noticee:

Provided that in respect of the same certificate of registration, not more than five regulatory censures under these regulations may be recommended to be issued, thereafter, the action as detailed in clause (ii) to (vi) of this sub-regulation may be considered.

(2) The designated authority shall endeavour to submit the report within one hundred and twenty days from the date of receipt of reply to the notice or date of personal hearing, whichever is later.]  

¹³[Order 

27. (1) On receipt of the report containing the measures recommended by the designated authority, the ¹⁴[competent authority] 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.

(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 ¹⁴[competent authority], after recording reasons, in writing may cause to extend the time specified for submitting reply to the notice.

(3) After considering the submission of the noticee, the ¹⁴[competent authority] 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.

(4) The ¹⁴[competent authority] may grant an opportunity of personal hearing where the designated authority has recommended cancelation of certificate of registration or the ¹⁴[competent authority] is of the prima facie view that it is a fit case for cancellation of certificate of registration.

Explanation: It shall not be necessary for the ¹⁴[competent authority] to give the noticee any opportunity of personal hearing if neither the designated authority has recommended cancelation of certificate of registration nor the ¹⁴[competent authority] is of the prima facie view that it is a fit case for cancellation of certificate of registration.

(5) After considering the facts and circumstances of the case, material on record and the written submission, if any, the ¹⁴[competent authority] 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.] 

Procedure for action on receipt of the recommendation.

28. ¹⁵[***]

Common order.  

29. The ¹⁴[competent authority] 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.

Intimation of the order.  

30. (1) Every report made by a designated authority and every order passed by the ¹⁴[competent authority] under this Chapter shall be dated and signed.

(2) A copy of the order passed under this Chapter shall be sent to the noticee and also uploaded on the website of the Board.

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

¹⁶[30A. Special procedure for action on expulsion from membership of the stock exchange(s) or clearing corporation(s) or termination of all the depository participant agreements with depository(ies)

(1) While disposing of the proceedings under this regulation, the Board shall not be bound by the procedure specified in the foregoing provisions of this Chapter.

(2) On receipt of intimation from all the stock exchange(s) or clearing corporation(s) of which the stock-broker or clearing member, as the case may be, was a member, that such stock broker or clearing member, has been expelled from its membership, the Board may issue a notice to such stock broker or clearing member calling upon the noticee to make its submission(s), if any, within a period not exceeding twenty-one days from the date of service thereof, through a written reply, along with documentary evidence, as to why the certificate of registration, granted under the Act or the regulations made thereunder, should not be cancelled. 

(3) On receipt of intimation from all the depositories where the participant was admitted, that the depository participant agreement has been terminated by the depository(ies), the Board may issue a notice to such participant calling upon the noticee to make its submission(s), if any, within a period not exceeding twenty-one days from the date of service thereof, through a written reply, along with documentary evidence, as to why the certificate of registration, granted under the Act or the regulations made thereunder, should not be cancelled.

(4) No opportunity of personal hearing shall be granted while disposing of the proceedings under this regulation.

(5) After considering the facts and circumstances of the case, material on record and the written submissions, if any, the Board shall endeavor to pass an order within twenty days from the date of receipt of written submissions.

(6) The Board may, while passing such order, impose such conditions upon the person as it deems fit to protect the interest of the investors or its clients or the securities market.

(7) The Board may require the person concerned 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 and other 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.

(8) On and from the date of cancellation of the certificate, the person concerned shall-

(a) return the certificate of registration so cancelled to the Board and shall not represent itself to be a holder of certificate for carrying out the activity for which such certificate had been granted; 

(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 on such activity and allow its clients or investors to withdraw or transfer their securities or funds held in its custody or to withdraw any assignment given to it, without any additional cost to such 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 record(s) or document(s) and securities or money of the investors that may be in custody or control of such person, within the time period and in the manner, as may be required under the relevant regulations or as may be directed by the Board while passing order under this Chapter or otherwise.

(9) A copy of the order passed under this regulation shall be sent to the noticee and also uploaded on the website of the Board.

(10) The intimation of the cancelation of the certificate of registration shall be sent to the stock exchange(s) or the clearing corporation(s) or the depository (ies), as the case may be.]

Surrender of any certificate of registration.  

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. 

(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 and other 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. 

(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 with such conditions.

Effect of debarment, suspension, cancellation or surrender.  

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 the period of such debarment or suspension it shall cease to carry on any activity in respect of which certificate had been granted;

(b) allow its clients or investors to withdraw or transfer their securities or funds held in its custody or withdraw any assignment given to it, without any additional cost to such client or investor;

(c) make provisions as regards liability incurred or assumed by it;

(d) take such other action including the action relating to any records or documents and securities or money of the investors that may be in custody or control of such person, within the time period and in the manner, as may be required under the relevant regulations or as may be directed by the Board while passing order under this Chapter or otherwise.

(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 itself to be a holder of certificate for carrying out the activity for which such certificate had been granted;

(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 on such activity and allow its clients or investors to withdraw or transfer their securities or funds held in its custody or to withdraw any assignment given to it, without any additional cost to such 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 and securities or money of the investors that may be in custody or control of such person, within the time period and in the manner, as may be required under the relevant regulations or as may be directed by the Board while passing order under this Chapter or otherwise.

Appeal to Securities Appellate Tribunal  

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 and Rules prescribed in this regards.

^[6][CHAPTER V-A

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. LADNRO/GN/2008/11/126538 dated May 26, 2008) prior to the coming into force of these regulations, shall be disposed of in accordance with the provisions of this chapter. 

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 Assistant General Manager or Assistant Legal Advisor for giving his recommendation after following the procedure 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 is received 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 and pass an appropriate order after considering the representation of the intermediary. 

(2) The officer appointed under sub-regulation (1) shall issue to the intermediary, against whom the proceedings are being held, a notice requiring the intermediary to make a written submission in reply to the notice within such time, not exceeding fifteen days after the receipt of the notice, as may be specified in the notice:

Provided that the officer may extend the time mentioned under sub-regulation (2) for sufficient reasons to be recorded in writing. 

(3) If the intermediary fails to make a written submission to the notice within the period specified in the notice, the officer shall, after considering the circumstances and in light of the material on record, submit a report to the Chairman or the member, as the case may be, and may recommend taking of any action under regulation 27 as he considers appropriate in the circumstances of the case and shall give reasons for recommending such action.

(4) If the intermediary makes submission within the said period, the officer shall, after considering the submission so made, submit a report to the Chairman or the member, as the case may be, and may recommend taking of any action under regulation 27 as he considers appropriate in 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 the officer under sub-regulation (3) or sub-regulation (4), shall pass such orders as he may deem appropriate.

(6) The Chairman or the member may pass a common order in respect of a number of intermediaries where the subject matter in question is substantially the same or similar in nature.

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 order on the website of the Board.] 

^[7][CHAPTER V-B POWER TO RELAX STRICT ENFORCEMENT OF THE REGULATIONS

Exemption from enforcement of the regulations in special cases.

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 ^[8][***] relating to testing new products, processes, services, business models, etc. in live environment of regulatory sandbox in the securities markets.

(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 continuous basis.

Explanation. – For the purposes of these regulations, “regulatory sandbox” means a live testing environment where new products, processes, services, business models, etc. may be deployed on a limited set of eligible customers for a specified period of time, for furthering innovation in the securities market, subject to such conditions as may be specified by the Board.]

CHAPTER VI  MISCELLANEOUS  

Manner of service of notice and order and publication of order.  

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 person or his duly authorized agent, by registered post acknowledgement due or by speed post or by such courier service or by electronic mail service or by any other means of transmission which affords a record of delivery; or

(c) in case of a stock broker or a sub-broker or a depository participant through the concerned stock 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 some other conspicuous part of the premises in which such person resides or is known to have last resided or carries on business or is known to have last carried on business or personally works for gain or is known to have last personally worked for gain.

(2) Every order passed under these regulations shall be put on the website of the Board.

Directions.  

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 any money or securities collected from the investors under any scheme or otherwise ,with or without interest;

(b) directing the intermediary or other persons associated with securities market not to access the capital market or not to deal in securities for a particular period or not to associate with any intermediary or with any capital market related activity;

(c) directing the recognised stock exchange concerned not to permit trading in the securities or units issued by a mutual fund or collective investment scheme;

(d) directing the recognised stock exchange concerned to suspend trading in the securities or units 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 the case: 

Provided that before issuing any directions the Board shall give a reasonable opportunity of being heard to the persons concerned: Provided further that if the circumstances warrant any interim direction is required to be passed immediately, the Board shall give a reasonable opportunity of hearing to the persons concerned after passing the direction, without any undue delay.

Power of the Board to issue clarifications.  

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.

Amendments to other regulations.  

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

Repeal and savings  

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 Enquiry Officer 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.

(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.

(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.

[1] Inserted by SEBI (Foreign Portfolio Investors) Regulations, 2014, w.e.f. 07-01-2014.

[2] Inserted by the SEBI (Stock Brokers and Sub- Brokers) (Amendment) Regulations, 2008, w.e.f. 11.08.2008.  ³ Words “foreign institutional investor,” omitted by the SEBI (Foreign Portfolio Investors) Regulations, 2014, w.e.f. 7-1-2014.

[3] Substituted for the symbol “.” by the SEBI (Intermediaries) (Amendment) Regulations, 2016, w.e.f.

[4] .05.2016.

[5] Inserted by the SEBI (Intermediaries) (Amendment) Regulations, 2016, w.e.f. 25.05.2016.

[6] Inserted by the SEBI (Intermediaries) (Amendment) Regulations, 2009, w.e.f. 14.07.2009.

[7] Inserted by the SEBI (Regulatory Sandbox) (Amendment) Regulations, 2020, w.e.f. 17-04-2020.

[8] The words “in technological aspects” omitted by the Securities and Exchange Board of India (Regulatory Sandbox) (Amendment) Regulations, 2021, w.e.f. 03-08-2021.