Synopsis
Sebi proposes to revise the ‘competent and appropriate person’ criteria for market intermediaries, including stock brokers, to ease compliance burdens. The regulator suggests removing automatic disqualification when filing an FIR or charge sheet in economic offense cases, arguing for a case-by-case assessment of conduct and risk to the investor.
IANSThe Securities and Exchange Board of India (Sebi) proposed to modify the “competent person” criteria for market intermediaries, including securities dealers, in an effort to reduce the compliance burden for entities facing legal action.
The regulator has suggested removing automatic disqualification of persons holding key positions while filing an FIR (first information report) or charge sheet in economic offense cases.
“It has been submitted that mere filing of a criminal complaint, FIR or charge-sheet should not result in disqualification as filing of such criminal complaint, FIR or charge-sheet is a preliminary step to implement the criminal law. This is also contrary to the established principle of criminal law that all persons are innocent until proven guilty,” Sebi said in a discussion paper released on Wednesday.
The move comes after the regulator submitted before the Bombay High Court that it would review its ‘fit and proper’ rules after brokers involved in the National Spot Exchange (NSEL) case, including Anand Rathi Commodities and Motilal Oswal, challenged a Sebi order declaring them “unfit and proper” to operate.
These brokers argued that disqualification based solely on allegations was a violation of their constitutional rights.
As per existing rules, intermediaries, principal officers and controlling persons face disqualification if there is a pending criminal complaint or FIR filed by Sebi or a pending charge sheet relating to economic offenses by an enforcement agency.
The regulator has now proposed that a rules-based formula could be onerous and inappropriate because it could lead to unintended consequences, such as placing a person at a disadvantage at an early stage of a pending criminal complaint or indictment, which could later result in an acquittal or release.
It could also be counterproductive to the goal of promoting ease of doing business, he said.
Any serious or incriminating factors may be considered on a case-by-case basis in the context of the person’s overall behavior and potential risk to investors’ interests, Sebi said.
The regulator said it would issue guidelines regarding cases where ongoing criminal proceedings are serious enough to result in disqualification.
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