SEBI extends timelines due to COVID-19, enabling brokers to comply with rules

SEBI extends timelines due to COVID-19, enabling brokers to comply with rules

Due to the COVID-19 outbreak, market regulator Sebi extended the deadline for debenture trustees to satisfy certain legal requirements.

Debenture trustees are required by law to perform routine monitoring and to publish various reports and certifications on stock exchanges and on their websites within certain deadlines.

The deadline for some disclosures has been extended to October 31, 2020; for others, it was earlier set at July 15, 2020. The deadline was originally set on July 15, but it had been pushed out to August 31, 2021.

You might submit an instrument cover document, a statement of guaranteed assets’ value, a report of debt service deposit account’s worth, or any other kind of security you’ve given to the government until August 31, 2021.

Sebi has extended the deadline for submitting the guarantor’s total wealth certificate (secured by personal guarantee), financials/value of the guarantor (based on audited financial statements of the guarantor, secured by corporate guarantee), report and title insurance report for assets held on stock exchanges until October 31, 2021.

Will SEBI Allow Brokers To Work From Home?

Due to the current outbreak, the broker association has eased call records of orders or instructions received from consumers when operating from designated alternative sites.

Brokers have requested a variety of leniencies from the market regulator, the Securities and Exchange Board of India. According to Moneycontrol, “the regulator seems willing to satisfy most of their requirements outlined in the letter.”

However, the regulator may be uncomfortable with retaining phone records of customer requests or directions. The regulator has previously expressed reservations about such a plan in the interest of investors.

“Proof of order confirmation, whether by email or phone records, is a critical safeguard for regular investors against any illicit transaction made via their accounts,” Anil Choudhary, Partner, FinSec Law Advisors, told Moneycontrol.

It is worth noting that in the past, SEBI regulated brokers engaged in aggressive derivative trading without their clients’ knowledge or agreement, resulting in significant losses for the investors who were the victims. Experts think that there should be no wiggle room in this legislation since it is so easy and inexpensive to maintain track of the calls/emails of trade orders placed by consumers with their brokers.

Sebi has allowed workers to work from home during COVID-19 from April 16, 2020, to January 31, 2021. It hasn’t, however, shortened the time it takes to finish a work-from-home shift.

Another source said that “Sebi is worried about front-running instances and illegal transactions conducted without the knowledge of the customer, which is detrimental to investors. It sounds compassionate on call recordings since it will help average investors save money. If they don’t document the dialogue and transaction, the consumer may be confused about what they’re getting into. Small investors may suffer if unlawful trading becomes more prevalent.

“SEBI has done different steps in the preceding many years to secure investor money,” a market expert told Moneycontrol. The broker must retain this recording on file for three years and make it accessible for examination during a physical inspection as proof that the trader placed an order with them.

According to one of their members who talked with Moneycontrol, broker associations have established infrastructure that allows for working from home. They set up a central facility where calls were able to be recorded and listened to, but orders could only be filled by employees working from home. This capability, however, is not developed by mid- or small-sized brokers. Customers are currently receiving order execution alerts, but the problem of illegal trading has not been fixed yet.

Sebi may also restrict brokers from operating from defined alternative locations if they do not have a recording facility during the execution of a trade.

The retail segment of the stock market has expanded rapidly. Recently, the number of people who have Demat accounts has almost doubled.

Investor confidence is being eroded as a result of the regulator’s unwillingness to take a risk. It will continue to enforce strict controls on intermediaries in order to preserve a healthy market.

How Does SEBI Work?

The Securities and Exchange Board of India (SEBI) was established as a statutory regulatory entity on April 12, 1992. The Securities and Exchange Board of India monitors and regulates the Indian capital and securities market, developing regulations and recommendations to protect investors’ interests. The SEBI’s headquarters are at Mumbai’s Bandra Kurla Complex.

SEBI is divided into many departments, each of which is led by a department head. SEBI is organized into around 20 divisions. Financial planning, economic policy research, debt instruments and hybrid securities, law enforcement, human resources, investment management, and everything in between are all handled by various divisions inside businesses.

The major goal of SEBI is to protect the interests of investors. As a consequence, the stock market is stimulated, and corporations are held accountable. Through a single platform, regulators, brokers, portfolio managers, and other financial professionals may all register and be regulated by SEBI. SEBI provides a structure through which these professions may register and be regulated.

This act governs depositories, participants, custodians of securities, foreign portfolio investors, and credit rating agencies. Insider trading, which is described as “fraudulent and unfair trading operations” in the securities market, is prohibited. As a consequence, investors are more educated about the many participants in the financial markets. This watchdog closely monitors significant share acquisitions and corporate takeovers. SEBI is in charge of all research and development required to keep the stock market functioning properly at all times.

About the author: Medhaavi Mishra