TMI BlogProcedural norms on Recognitions, Ownership and Governance for Stock Exchanges and Clearing Corporations.X X X X Extracts X X X X X X X X Extracts X X X X ..... :- 1.1 An applicant seeking recognition as a stock exchange/ clearing corporation shall substantiate its capability to fulfill all the requirements laid down under SCRA, SCRR and regulation 7 of the SECC Regulations at the time of making the application. 1.2 Further, for the purpose of grant of in-principle approval under regulation 7(5) of the SECC Regulations, the Board may take into account the factors which it may deem fit in the interest of the securities market. For this purpose, the Board may consider the information and documents including but not limited to the following:-: Business feasibility plan for the next five years, Net worth certificate/ financial books and bank account details, Detailed write-up on each of its functions, Details of authorised officials along with specimen signatures of the authorised signatories, Proposed organisational structure, Necessary undertakings, Manpower planning, Background and necessary information (as specified herein) to establish that its shareholders/promoters are fit and proper persons, Information regarding its Office set-up, Appointment of Managing Director after following due process 1.3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eholders to SEBI, for achieving the networth in terms of regulation 14 of the SECC Regulations, within 90 days from the date of this circular. PART -B OWNERSHIP 4. Application for grant of approval for shareholding beyond 2% or 5%:- 4.1 A shareholder seeking SEBI's approval for holding more than 2% or 5% of paid up equity share capital of a stock exchange or clearing corporation shall submit the following particulars:- a) Name b) Address c) Details of employment/ business, if any: d) SEBI registration number,if any. e) Details of registration with other statutory authorities,. f) Declaration regarding the fulfillment of requirements of regulation 20 of SECC Regulations. g) Details of action /penalties taken/imposed against/upon him/it by any statutory authority in India or abroad. h) Details of activities that may, in the opinion of the shareholder, lead to his/its disqualification. i) Association with trading members/clearing members of stock exchanges/clearing corporations. j) Cases pending before any Court, Tribunal or any other statutory authority in India or abroad, if any. k) Previous approvals from SEBI as fit and prope ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l) Disclosure of the names of his dependents associated with the securities market as member, sub-broker, authorized person or holding any SEBI registration. m) An undertaking that he shall abide by the code of conduct and code of ethics prescribed in Part A and Part B of Schedule II to SECC Regulations. n) In the case of public interest directors, consent letters for acting as a public interest director. o) Pending / completed criminal cases pending before any authority in India or abroad, if any. 6.1.1 The stock exchange/ clearing corporation shall forward the above details to SEBI while recommending their names alongwith the minutes of the governing board meeting where their name/s was approved, copy of the shareholder's resolution (wherever applicable), a confirmation by the stock exchange/ clearing corporation that they are fit and proper persons in terms of their fit and proper criteria and are not associated with any trading member or clearing member in terms of regulation 23(7) read with regulation 2(1)(b) of SECC Regulations. 6.2 Managing Director / Executive Director:- 6.2.1 The stock exchange/ clearing corporation shall constitute a Committee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ir subsidiary. 6.3.5 Public interest directors shall peruse the relevant laws, code of conduct, code of ethics, etc and submit an undertaking to the stock exchange/clearing corporation that they are aware of their role, responsibilities and obligations. The stock exchange/clearing corporation shall also provide at least seven days of training to every public interest director each year. 6.3.6 In case of extension of the term of the public interest director or appointment of a new public interest director, the stock exchange/ clearing corporation shall apply to SEBI two months before the expiry of the term. In addition to the other requirements prescribed herein, the application for extension of term of the public interest director shall be accompanied with, his attendance details on meetings of various mandatory committees and on the governing board of the stock exchange / clearing corporation, reasons for waiver of the cooling off period. 6.3.7 The public interest director shall not be subject to retirement by rotation. 6.3.8 The existing public interest director shall continue holding the post, till a new public interest director is appointed in his place. 6.3.9 In ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... formation of various committees by stock exchanges. A list of all such mandatory committees along with their new composition and function is placed under Annexure A to this circular. The list of mandatory committees for clearing corporations is placed under Annexure B to this circular. 7.2 The stock exchanges and clearing corporations shall form the respective committees in accordance with the composition prescribed therein and accordingly no approval from SEBI is required. The existing stock exchange / clearing house of a stock exchange and person who clears and settles trades of a recognized stock exchange shall submit a confirmation within three months from the date of this circular. The stock exchange and clearing corporation shall submit a confirmation within three months from the date of their recognition. The confirmation shall be submitted within three months with regard to the formation and composition of such committees. Any other conditions pertaining to the committees prescribed under the earlier circulars shall continue to apply. In addition to the above lists, the committees that are mandated for listed companies shall apply mutatis mutandis to stock exchanges and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... A malus arrangement permits the stock exchange/clearing corporation to prevent vesting of all or part of the amount of a deferred remuneration. and clawback arrangements A clawback is a contractual agreement between the employee and the stock exchange/clearing corporation in which the employee agrees to return previously paid or vested remuneration to the stock exchange/clearing corporation under certain circumstances. 8.2 Apart from the above, the compensation policy of the stock exchange/ clearing corporation shall take into consideration the following: financial condition / health of the stock exchange/ clearing corporation, average levels of compensation payable to employees in similar ranks, should not contain any provisions regarding incentives to take excessive risks over the short term, revenues, net profit of the stock exchange/ clearing corporation, comparable to the industry standards, role and responsibilities of the key management personnel, periodic review 8.3 The stock exchange shall confirm to SEBI within three months from the date of this circular that the compensation for the key management personnel is in accordance with the no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tted to SEBI for approval, subsequent to the following. The proposed amendment/s shall first be approved by the governing board of the stock exchange/clearing corporation, followed by shareholders approval (wherever applicable), then published in the Gazette of India (wherever applicable) and the respective State and then shall be submitted to SEBI for approval. The proposal shall be accompanied by the minutes of the governing board, the shareholder's resolution and public criticism. However, in case the amendments are pursuant to Regulations, circular etc, issued by SEBI, the same shall not be subject to shareholder's approval. 11. Internal manual for conflict resolution: The stock exchange/clearing corporation shall have an internal manual covering the management of conflicts between commercial and regulatory functions of the stock exchange/clearing corporation. The stock exchange/ clearing corporation shall put in place a policy for comprehensive training and awareness of its employees on the various conflicts of interests involved in the functioning of its regulatory departments. Further, the entire conflict management framework shall periodically be reviewed an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ity, which is trading or clearing member, the person will not be deemed to be associate of trading member or clearing member subject to that Public Limited Company does not have any other association with trading member or clearing member. e) Recognised Stock Exchange and recognised clearing corporation, shall monitor and ensure the compliance of the Regulation 23(7) on continuous basis, to ensure that directors appointed, on their governing board, will not get associated with Trading Member or Clearing Member after approval and appointment, 14.2 For the purpose of Regulation 27(6) , it is clarified that in terms of the said Regulation, the tenure refers to the period of posting as key management personnel in a regulatory department, which shall be for a fixed period. 14.4 For the purpose of regulation 35, the Governing Board of a recognised stock exchange or a recognised clearing corporation shall confirm compliance of that regulation in writing on half yearly basis. 15. The recognized stock exchanges/ clearing corporations are advised to:- i. make necessary amendments to the relevant rules/ bye-laws/ regulations for the implementation of the above decision immediat ..... X X X X Extracts X X X X X X X X Extracts X X X X
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