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TMI BlogStatutory Committees at Market Infrastructure Institutions (MIIs)X X X X Extracts X X X X X X X X Extracts X X X X ..... ia (Depositories and Participants) Regulations, 2018 (hereinafter referred as D P Regulations, 2018 ), inter alia , state that, MIIs shall have the following statutory committees: 2.1. Functional Committees: 2.1.1. Member Committee (MC) [ SEBI Board in its meeting dated April 30, 2024 approved the amendment to Clause (a) of sub-regulation (2) of Regulation 29 of SECC Regulations, 2018 to change the name of Member and Core Settlement Guarantee Fund Committee to Member Committee . Appropriate amendments to SECC Regulations, 2018 is being notified . ] and 2.1.2. Nomination and Remuneration Committee (NRC) 2.2. Oversight Committees: 2.2.1. Standing Committee on Technology (SCOT) 2.2.2. Regulatory Oversight Committee (ROC) and 2.2.3. Risk Management Committee (RMC) 2.3. Investment Committee 3. Based on the recommendations of the Committee on Strengthening Governance of Market Infrastructure Institutions, the functions, composition and Terms of Reference (TOR) of the statutory committees of MIIs were further deliberated in the Industry Standards Forum (ISF) of MIIs. 4. Taking into consideration the recommendations of the ISF of MIIs and subsequent deliberations, the revised TOR of statut ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... verning board, the committee may preferably be chaired by the said PID. 6. Investment Committee (IC) a. The Committee may include the MD, NIDs (other than Executive Director), IEPs, along with PIDs. 5.1.2. In any statutory committee, the total number of PIDs shall not be less than the total number of other members of the Committee (including IEPs) put together. In case of SCOT, the total number of PIDs shall not be less than the total number of other members of the Committee, excluding IEPs. 5.2. The Chairperson of each statutory committee at MII shall be a PID. 5.3. The voting on a resolution in the meetings of the statutory committees at MIIs shall be valid only when the number of PIDs that have casted their vote on such resolution is not less than the total number of other members put together who have casted their vote on such resolution. 5.4. The invitees, if any, to the meetings of the Committees shall not have any voting rights. 5.5. The casting vote in the meetings of the statutory committees shall be with the Chairperson of the committee. 5.6. The functions or terms of reference of any statutory committee cannot be delegated. However, for the Member Committee (MC) of MIIs, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... escribed under Regulation 24(3) of the SECC Regulations, 2018. 7.3.4. IEPs shall not use or act on any sensitive information received in capacity as a member of the statutory committee for obtaining any undue benefit. 7.4. The members of statutory committees shall abide by the code of conduct as applicable to them in terms of both SECC Regulations, 2018 and D P Regulations, 2018. 7.5. In the interest of securities market, SEBI may suo moto nominate members on any statutory committee of the MIIs, if felt necessary. 7.6. MIIs shall devise an internal mechanism to obtain regular feedback, inputs, suggestions, etc. on regulatory, non-regulatory and operational matters from various stakeholders including trading members, clearing members and depository participants, investors, etc. 7.7. The newly recognized stock exchange, clearing corporation and depository shall submit a confirmation to SEBI within three months from the date of their recognition regarding the formation and composition of statutory committees. 8. In view of the revised TOR of statutory committees at Annexure A, paragraph 6.6.1 of Chapter 3 of Master Circular for Stock Exchanges and Clearing Corporations dated October 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or Statutory Committees of Stock Exchanges: S.N. Name of Committee Brief terms of reference (I) Functional Committees 7. Member Committee (MC) (I) On admission, transfer and surrender of membership/Withdrawal and Change in control a. Formulate the policy to scrutinize, evaluate, accept or reject applications for admission of members, transfer of membership and approve surrender of membership or withdrawal and Change in Control. b. The activities with regard to scrutinizing, evaluating, accepting or rejecting applications for admission, transfer surrender, withdrawal and change in control of membership can be implemented through an Internal Committee (IC) under MC. c. Define the Standard Operating Procedure (SOP) for the IC, including the timelines to be followed by IC, its composition, standardize criteria to scrutinize, evaluate, accept and grounds for rejection of applications, and other associated aspects to ensure uniformity and consistency while dealing with applications or cases. For scenarios not covered in the SOP, IC should seek approval of MC. d. Oversee the implementation of the membership policy by the IC, including its timelines, uniformity and consistency in approach, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The activities with regard to realization of assets and deposits of the defaulter or expelled member and appropriation of the same amongst various dues and claims against the defaulter or expelled member, etc. can be implemented through an Internal Committee (IC) under MC. o. Define the SOP for the IC, including the timelines to be followed by IC and its composition. For scenarios not covered in the SOP, IC should seek approval of MC. p. In the event both the trading member and the constituent clearing member are declared defaulter, then the MC of the stock exchange and that of the clearing corporation shall work together to realise the assets of both the trading member and the clearing member. q. Admission or rejection of claims of client or trading members or clearing members over the assets of the defaulter or expelled member. (IV) On IPF related aspects: r. Recommendation in respect of the claims of clients of defaulter trading member to the Trustees of the IPF on whether the claim is to be paid out of IPF or otherwise. 8. Nomination Remuneration Committee (NRC) (I) Governing Board its Member related aspects: a. Scrutinising and interviewing applicants for selecting the MD of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ning and finalizing the Key Result Areas (KRAs) of all KMPs at the beginning of every year. Review the same in line with organization needs. q. Ensuring that no KMP reports to a non-KMP. (III) On other organisation level related aspects: r. Ensure that no employee of the stock exchange is working or reporting to an employee of any other company where the stock exchange has invested and vice-versa. s. Ensure that hiring of consultants is based on a pre-defined SOP of the stock exchange. t. Framing, reviewing, implementing and monitoring SOP for imposing disciplinary actions against employees of stock exchange. u. Besides the above, it will also discharge the function as Nomination Remuneration Committee under the Companies Act, 2013 and SEBI (LODR) Regulations, 2015 as amended from time to time. (II) Oversight Committees 9. Standing Committee on Technology (SCOT) a. Ensure the availability of required IT infrastructure for core and critical functions under verticals for Critical operations and Regulatory, compliance, risk management and investor grievances . b. Ensure existence of adequate Business Continuity Plan (BCP) and Disaster Recovery (DR) plans. c. Ensuring sound and prudent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and Investigation: i. Oversight of market through order and trade level alerts, security level alerts, processing of alerts, price band changes, rumour verifications, shifting of securities to trade for trade segment, action against listed companies as a part of Surveillance Action, detailed investigations undertaken, disciplinary actions, development of new alerts based on learnings from past or ongoing cases, etc., as may be applicable to the relevant segments of the exchange. ii. Requests, received from members of stock exchange, for review of decision taken by stock exchange regarding annulment of trades and provide its recommendation within 30 days of receipt of request by the stock exchange. b. Listing of Securities : Oversight of admission of securities for trading, suspension, revocation, delisting, etc. c. Compliance: i. Oversee and monitor implementation of SECC Regulations, 2018 and other applicable rules and regulations along with SEBI Circulars and other directions issued thereunder. ii. Review the observations arising from various SEBI inspections, ensuring its advisories and findings are appropriately and timely addressed, and reports to governing board on timely ba ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction fees, etc., its justification and impact, j. Oversee contribution of the stock exchange towards Core Settlement Guarantee Fund (SGF) of the Clearing Corporation. k. Review annually the performance of Product Advisory Committee (for Stock Exchanges with Commodities Derivatives segment) l. Oversee matters related to product design and review the design of the already approved and running contracts. 11. Risk Management Committee (RMC) a. Formulate a detailed Risk Management Framework (RMF) which shall be approved by the governing board of the stock exchange to ensure continuity of operation at all points of time. b. The RMF shall include the following: i. The framework for identification of internal and external risks. ii. Measures for risk mitigation including systems and processes for internal control. iii. Business continuity plan c. Monitor each risk associated with the functioning of the stock exchange more specifically for functions under vertical 1 and 2. d. Review the RMF Risk Mitigation Measures at least once annually taking into account the changing industry dynamics and evolving complexity. e. Monitor and review enterprise-wide risk management plan and lay down proced ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nted through an IC under MC. e. Define the Standard Operating Procedure (SOP) for the ICs, including the timelines to be followed by ICs, its composition, standardize criteria to scrutinize, evaluate, accept and grounds for rejection of applications, and other associated aspects to ensure uniformity and consistency while dealing. / with applications or cases. For scenarios not covered in the SOP, ICs should seek approval of MC. f. Oversee the implementation of the SOP by the ICs, including its timelines, uniformity and consistency in approach, based on quarterly report submitted by ICs. MC shall continue to be responsible and accountable for the activities of the ICs. (II) On Regulatory Actions g. Ensure that the clearing corporation has detailed SOP and processes in place towards monitoring the activities of its members through inspections. h. Ensure that there is mechanism for monitoring of its members on various parameters through technology and take necessary action for non-compliance. i. Formulate policy for regulatory actions, including warning, monetary penalty, suspension, withdrawal of clearing membership, declaring of default, expulsion, to be taken by the clearing corpor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... earing member and the trading member. s. Admission or rejection of claims against such members over the assets of the defaulter or expelled member. 2. Nomination and Remuneration Committee (NRC) (I) Governing Board its Members related aspects: a. Scrutinising and interviewing applicants for selecting the MD of the clearing corporation. b. Adhering and developing a skill evaluation metrics to assess applications of new or existing PIDs and NIDs for their appointment and/or reappointment and recommending their names to the Governing Board. c. Ensuring at all times that the governing board comprises of directors with required skill set and expertise in the areas as provided in SECC Regulations, 2018. d. Ensure compliance with governing board level skill diversity at the time of appointment, reappointment or extension of tenure of PIDs or NIDs. e. Framing reviewing the policy to carry out internal evaluation of every director s performance, including that of PIDs. f. Reviewing and recommending extension of the term of appointment and re-appointment of existing PIDs. g. Appointment of Independent External Professionals (IEPs). (II) KMPs related aspects: h. Identifying KMPs based on impo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) a. Ensure availability of required IT infrastructure for core and critical functions under verticals for Critical operations and Regulatory, compliance, risk management and investor grievances . b. Ensure existence of adequate Business Continuity Plan (BCP) and Disaster Recovery (DR) plans c. Ensuring sound and prudent policies, standards and procedures for managing technology risks and safeguard information assets in the clearing corporation. d. Review the implementation of technology risk management framework and strategy of clearing corporation. e. Monitor whether the technology used by the clearing corporation remains up to date and meets the growing demands of the markets. f. Periodic review of the IT system and network architecture design to identify any weaknesses in the existing design. g. Review of in-house availability of appropriate IT staff to manage IT systems and related outsourcing arrangement. h. Monitor the adequacy of system capacity and efficiency. i. To look into the changes being suggested by the clearing corporation to the existing software or hardware. j. Oversee investigation into the computerized risk management or clearing settlement system, such as hang ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Oversee the compliance of the code of conduct by KMPs and members of statutory committees (except directors) iii. Review compliance with the provisions on Code of Conduct Institutional mechanism for prevention of Fraud or Market Abuse of Chapter VI of SEBI Master Circular for Stock Exchanges and Clearing Corporations at least once in a financial year and also verify that the adequacy and operational effectiveness of the systems for internal control. iv. Periodically oversee the dealings in securities by KMPs and IEPs. v. Periodically oversee the trading conducted by firms or corporate entities in which the directors of the Clearing Corporation hold twenty percent or more beneficial interest or hold a controlling interest. vi. While monitoring trades by KMPs and members of statutory committees, ROC shall take into consideration sensitive information held by them as per structured digital database maintained by clearing corporation. c. Ensure the adequacy of resources dedicated to functions under verticals for Critical operations and Regulatory, compliance, risk management and investor grievance . d. Grievance Redressal mechanism: i. Define policy and SOP for dealing with complaints ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 2013 and the SEBI (Listing Obligation and Disclosure Requirement), Regulations, 2015. 6. Investment Committee (IC) a. Evaluate each investment and divestment proposals, whether requiring infusion of funds or otherwise, except treasury investments. b. Evaluate proposals of capital expenditure. c. Make detailed analysis of existing investments. d. Investment Committee can provide the recommendation along with rationale to the governing Board C. Terms of Reference for Statutory Committees of Depositories: S.N. Name of Committee Brief terms of reference (I) Functional Committees 1 Member Committee (MC) (I) On admission, transfer and surrender of membership/Withdrawal and Change in control a. Formulate the policy to scrutinize, evaluate, accept or reject applications for admission of members (participants), transfer of membership and approve surrender of membership or withdrawal and Change in Control. b. The activities with regard to scrutinizing, evaluating, accepting or rejecting applications for admission, transfer surrender, withdrawal and change in control of membership can be implemented through an Internal Committee (IC) under MC. c. Define the Standard Operating Procedure (SOP) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... regulatory measure, the Committee shall adopt a laid down process, based on the 'Principles of natural justice , and 'Principle of proportionality'. The 'Principle of natural justice' may be extended by the MC/IC as applicable. l. Any review, appeal or waiver of penalty filed shall be placed before MC for its consideration. (III) On IPF related aspects: m. Recommendation in respect of the legitimate claims of the beneficial owners, in case the same is not settled by the beneficial owner indemnity insurance, to the Trustees of the IPF on whether the claim is to be paid out of IPF or otherwise. 2 Nomination and Remuneration Committee (NRC) (I) Governing Board its Members related aspects: a. Scrutinising and interviewing applicants for selecting the MD of the Depository. b. Adhering and developing a skill evaluation metrics to assess applications of new or existing PIDs and NIDs for their appointment and/or reappointment and recommending their names to the Governing Board. c. Ensuring at all times that the governing board comprises of directors with required skill set and expertise in the areas as provided in SEBI (Depositories and Participants) Regulations, 2018. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... invested and vice-versa. s. Ensure that hiring of consultants is based on a pre-defined SOP of the Depository. t. Framing, reviewing, implementing and monitoring SOP for imposing disciplinary actions against employees of depository. u. Besides the above, it will also discharge the function as Nomination Remuneration Committee under the Companies Act, 2013 and SEBI (LODR) regulations, 2015 as amended from time to time. (IV) Oversight Committees 3. Standing Committee on Technology (SCOT) a. Ensure the availability of required IT infrastructure for core and critical functions under verticals for Critical operations and Regulatory, compliance, risk management and investor grievances . b. To ensure existence of adequate Business Continuity Plan (BCP) and Disaster Recovery (DR) plans. c. Ensuring sound and prudent policies, standards and procedures for managing technology risks and safeguard information assets in the depository. d. Review the implementation of technology risk management framework and strategy of the depository. e. Monitor whether the technology used by the depository remains up to date and meets the growing demands of the markets. f. Periodic review of the IT system and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... SEBI/stock exchanges/other statutory bodies, monitoring of shareholding for listed and unlisted MIIs as per norms specified by SEBI, appropriate action based on the findings arising out of periodic surveillance meetings, development of new alerts based on learnings from past or ongoing cases, etc., as may be applicable to the depositories. b. Admission of Securities: i. To consider and decide on the criteria for admission, withdrawal of securities and continuous compliance requirements. ii. To declare any security admitted into Depository as ineligible. c. Compliance: i. Oversee implementation and compliance with D P Regulations, 2018 as amended from time to time and other applicable rules and regulations along with SEBI Circulars and other directions issued thereunder. ii. Review the observations arising from various SEBI inspections, ensuring its advisories and findings are appropriately and timely addressed, and reports to governing board on timely basis. iii. Monitor and assess the depository against the PFMIs on an annual basis and submit a report to the governing board of the depository. d. Code of Conduct: i. Lay down procedures for implementation of the code of conduct and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... following: i. The framework for identification of internal and external risks; ii. Measures for risk mitigation including systems and processes for internal control and; iii. Business continuity plan. c. Monitor each risk associated with the functioning of the depository more specifically for functions under vertical 1 and 2. d. Review the RMF Risk Mitigation Measures at least once annually taking into account the changing industry dynamics and evolving complexity. e. Monitor and review enterprise-wide risk management plan and lay down procedures to inform governing board about the risk assessment and mitigation procedures. f. RMC shall coordinate with other committees. In case of any overlap with activities of other committees, RMC may consider views of such committees. g. Monitor implementation of the RMF and also keep the governing board informed about implementation of the RMF and deviation, if any. h. Approve the Half-Yearly Risk report to be submitted by the Chief Risk Officer (CRiO) to SEBI and the governing board of the depository. i. To comply with the roles and responsibilities as provided under the Companies Act 2013 and the SEBI (Listing Obligation and Disclosure Requir ..... X X X X Extracts X X X X X X X X Extracts X X X X
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