SEBI New Rules : The Securities and Exchange Board of India (SEBI) has made a major change for the stock market. SEBI has taken a step forward to ease compliance and as a major reform towards the market. SEBI has finalized several major reforms for stock brokers and stock exchanges.

SEBI has decided to rationalize and standardize the penalty framework applicable to stock brokers. Under the new rules, both the number and severity of penalties imposed on brokers will be reduced. SEBI has made this announcement to take a step forward towards Ease of Doing Business.

According to a report in Business Line, SEBI Chairman Tuhin Kant Pandey said that before formulating the new rules, the regulator held extensive discussions with stockbrokers and consulted them, following which the new rules were formulated. SEBI has decided that minor and minor mistakes by brokers will no longer be considered a penalty. Instead, they will be called “Financial Discrepancy.” This means that minor mistakes will no longer attract heavy penalties.

Penalties will be imposed in only 90 cases instead of 235.
According to media reports, a total of 235 existing penalty items were reviewed under SEBI’s new system. Of these, 40 penalties were completely eliminated, while 105 minor procedural lapses and technical errors have been classified as “Financial Disincentives.” After this, penalties will now apply only to 90 violations. SEBI has amended 36 penalties. In 7 cases, only a warning or advice will be issued for the first offense. In 6 cases, the maximum penalty limit has been set. No changes have been made in 29 cases. 12 new penalty provisions have been added.

Relief for Technical Glitches
Technical glitches in the market, such as order processing or system errors, often resulted in penalties for brokers. Under the new rules, penalties for such technical issues will be significantly reduced, thus reducing unnecessary pressure on brokers.

The term “penalty” will not be used everywhere.

SEBI states that the term “penalty” is often associated with “stigma” or “punishment,” which can impact a broker’s reputation. Therefore, in cases of technical or procedural errors, the term “financial disincentive” will now be used instead of “penalty.” SEBI has also clarified that penalties imposed by different exchanges for the same error will be avoided. According to SEBI’s system, only the lead exchange will take action in such cases, so that brokers do not face multiple penalties for the same mistake.

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According to the new SEBI rules, if a client has traded after 30 calendar days and before the date of the next monthly settlement period, then its settlement can be done on the dates notified by the exchange in the annual calendar.

“If the client trades after 30 days and before the subsequent dates of the monthly running account settlement cycle, the client’s account will be settled by the trading member as per the client’s quarterly/monthly settlement preference,” said a circular issued by Sebi on Monday.

What was the rule earlier?

As per a circular dated June 16, 2021, the accounts of clients who have not made any transactions in the last 30 days were required to be settled by the Trading Member (TM) within the next three working days.

This rule of SEBI was objected to by the Brokers’ Industry Standards Forum (ISF). The forum said that under the existing rule, trading members had to identify such clients on a daily basis, which led to daily settlement of funds. This led to procedural complexities and wastage of time.

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Earlier, time was given till October 14 for this. This change in the deadline has been made so that it can be implemented easily. The market regulator has taken this decision after receiving representations from major institutions like clearing corporations, exchanges and stock brokers.

Final operational guidelines were to be issued by August 5

A notification was issued by SEBI on June 5. Under this, to improve operational efficiency and reduce risk, the clearing corporation was made mandatory to deposit securities directly into the customer’s demat account. Currently, the clearing corporation deposits the payment of securities into the account of the ‘broker’. After that the ‘broker’ deposits it into the demat account of the concerned investor. In this regard, the clearing corporation had to issue the final operational guidelines by August 5.

However, it was released at the end of August due to long negotiations in the Brokers Industry Standards Forum (Brokers ISF). According to a notification issued a day earlier, SEBI has extended the date of implementation of the rules to November 11 to ensure smooth transition without any disruption in the market after a review meeting and the report of the broker platform.

Decision to discontinue weekly index derivatives

Apart from this, NSE has decided to discontinue weekly index derivatives for Bank Nifty, Nifty Midcap Select and Nifty Financial Services. According to the National Stock Exchange (NSE), now only Nifty will have weekly expiry. This information was given in a circular issued by NSE on October 10. NSE said that from November 13, 18 and 19, weekly index derivatives contracts will be closed for Bank Nifty, Nifty Midcap Select and Nifty Financial Services.

After this, from November 20, the exchange will have to limit the weekly option expiry to one index per exchange. Apart from this, the exchange will be entrusted with the task of monitoring intraday positions at least four times a day.

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The Securities and Exchange Board of India ( SEBI ) has made changes in the Internet-Based Trading rules. According to SEBI ‘s rules, now a stock broker will get approval for internet-based trading within 7 days. Earlier, a stock broker used to get approval within 30 days.

Why did SEBI take this decision

SEBI has taken this decision so that stock brokers can trade easily. Under the internet-based trading rule, now the broker will have to take permission from the stock exchange to use the internet-based trading rule service. The broker will have to apply for permission.

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SEBI has issued a circular for internet-based trading rules. According to the circular, the stock exchanges had to inform the brokers about their decision within 30 days, but now they have to inform the brokers within 7 days.

Also, SEBI has done away with the existing requirement of periodic confirmation of internet-based trading (IBT) data by stock brokers before it is published by the stock exchanges. Now, the stock exchanges will publish IBT data based on the details of IBT terminals provided by the brokers.

The decision has been taken after SEBI received a request from the Industry Standards Forum (ISF) of stock brokers regarding internet-based trading. SEBI said that the new guidelines will come into force with immediate effect.

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Let us tell you that the process of removing the shares of the company from the exchange is called delisting. If put in simple words, after delisting, trading cannot take place in the stock exchange. Delisting can happen on the will of the company management or ignoring the rules.

In delisting, the company’s stock is removed from the stock market. who have bought shares. The company buys them back from investors.

What are the current rules for delisting?

Experts say that the company fixes the floor price for delisting. Floor price means the minimum amount at which the shares will be bought back. After the floor price, the reverse book building process begins. Reverse book building means the price at which the investor wants to sell the shares of the company. The average price of reverse book building becomes the delisting price.

Why delisting- The management feels that the valuation of the shares is not right or due to the ignorance of the rules, regulatory ban has been imposed on the company. Apart from this, delisting is done for violating the listing rules.

What will happen now- According to CNBC, SEBI is reviewing the delisting rules. Sources say that work can be done on fixed price for delisting. If the first attempt of delisting fails, it can be extended further. The problems related to reverse book building for delisting are being reviewed. Consultation papers can be issued on this in August.

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