SEBI Proposes Amendments To Handle Securities Law Violations By Intermediaries Through Summary Proceedings

The introduction of summary proceedings addresses issues observed in the current regulatory framework. Presently, only brokers' matters are resolved through summary proceedings. However, SEBI has noted an increased number of violations by other intermediaries, such as depository participants and research analysts, which are straightforward and require minimal documentation. For example, intermediaries are required to pay periodic fees to maintain their registration. Many have failed to do so which has resulted in expired registrations. Under the current Chapter V of the Intermediaries Regulations, the process to cancel expired registrations is long and cumbersome, even when the violation is clear and undisputed.

The proposed summary proceedings will apply under specific conditions, including the expulsion of a member by stock exchanges or clearing corporations, termination of depository agreements, claims of returns or performance not permitted by SEBI, and non-payment of fees for maintaining registration. They will also apply if an intermediary is untraceable, fails to submit periodic reports for three consecutive periods, or admits the violation.

Intermediaries will have twenty-one days to respond to notices, and the competent authority will aim to pass an order within twenty-one days of receiving the response or after the response period expires. The authority may cancel or suspend the certificate of registration or impose other appropriate orders.

The intermediary may be required to satisfy certain conditions, and the order will be communicated to the intermediary and uploaded on SEBI's website. Copies will also be sent to relevant stock exchanges, clearing corporations, or depositories.