Royzz & Co
SEBI directs exchanges, clearing corporations and depositories to enact policies
The Securities and Exchange Board of India (SEBI) has directed stock exchanges, clearing corporations and depositories to put in place code of conduct and institutional mechanism to prevent fraud or market abuse by them and their designated persons. Managing directors/Chief executive officer of Market Infrastructure Institutions (MIIs) will be obligated to frame code of conduct and put in place an institutional mechanism and the board of directors needs to ensure compliance. MIIs will have to formulate a code of conduct to regulate, monitor and report trading by their designated persons and immediate relative of designated persons towards achieving compliance with the PIT (Prohibition of Insider Trading) Regulations. They will have to identify and designate a compliance officer to administer the code of conduct.
The boards of directors of MIIs (in consultation with the compliance officer) will have to specify the designated persons to be covered by the code of conduct. MIIs would have to formulate written policies and procedures for inquiry in case of suspected fraud or market abuse by their designated persons and immediate relatives of designated persons, which need to be approved by their board of directors. MIIs need to initiate appropriate inquiry upon becoming aware of any illegal or unethical practices or transactions of suspected fraud or market abuse by their designated persons and immediate relatives of designated persons and promptly inform their board of directors of the same and results of the inquiry. Additionally, they need to have an effective whistlerblower policy to enable stakeholders, including employees to freely communicate their concerns about illegal or unethical practices and report instances of fraud or market abuse or any suspicion of fraud or market abuse.