The Securities and Exchange Board of India (SEBI) has notified a special procedure for action on expulsion from membership of stock exchanges and clearing corporations. The framework will also be applicable in situations of termination of a depository participant agreement by the depositories. Under this procedure, an opportunity for a personal hearing will not be granted to the stockbroker or clearing member. The stockbroker or clearing house will be given the opportunity to make its submission within 21 days through a written reply, along with documentary evidence, as to why the certificate of registration granted under the rules should not be cancelled.
SEBI can impose any such conditions it deems fit as necessary to protect the interests of investors or the securities market. The entity must fulfill certain criteria, i.e., maintenance and preservation of records, redressal of investor grievances; transfer of records, funds or securities of its clients; the arrangements made by it for ensuring continuity of service to the clients; and arrangements made towards defaults or pending action. Once, the certificate of registration is cancelled, the entity will have to make arrangements to transfer its activities to a person holding a valid registration, and cease to carry out all activities to which the cancelled registration pertains. The new rule has come into effect from May 5, 2021.