SEBI’s Stricter Penalties to Bolster Surveillance Standards at Market Infrastructure Institutions
Moneylife Digital Team 07 June 2024
Securities and Exchange Board of India (SEBI) has introduced a stringent new framework to reinforce surveillance standards at market infrastructure institutions (MIIs) such as stock exchanges, clearing corporations and depositories. The framework is scheduled to come into effect from 1 July 2024. 
 
The framework for financial disincentives for surveillance related lapses (FDSRL) aims to penalise MIIs for any lapses in fulfilling their surveillance obligations. Surveillance related lapses (SRLs) encompass failures to implement SEBI's directives, lapses in conducting surveillance activities, and inadequate or non-reporting surveillance endeavours. 
 
The financial penalties are determined based on the MII's annual revenue and the frequency of lapses. For instance, a first-time lapse by an institution with revenue exceeding Rs1,000 crore will result in a penalty of Rs25 lakhs, escalating to Rs1 crore for subsequent lapses.
 
Upon identifying a lapse, SEBI will allow the respective MII to provide an explanation. If a penalty is imposed, it must be settled within 15 working days, payable to the SEBI Investor Protection and Education Fund (SEBI-IPEF).
 
However, SEBI clarified that minor procedural delays or errors, deemed inconsequential will not attract financial penalties but may result in administrative actions such as warnings.
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