Sebi proposes overhaul of ‘fit and proper’ test for market intermediaries

The Securities and Exchange Board of India (Sebi) is planning a revamp of its ‘fit and proper’ framework for market intermediaries as some of the rules may be too rigid and risk penalizing individuals and firms before wrongdoing is established. In a consultation paper issued on Wednesday, the markets regulator said experience gained from enforcing the rules over the past five years, as well as global best practices, warrant a review of Schedule II of the Intermediaries Regulations. The move follows representations from market participants, who flagged onerous compliance requirements and the risk of irreparable harm arising from premature disqualifications. Pulkit Sukhramani, partner at JSA Advocates & Solicitors, said, “The revamp of the fit and proper norms is progressive. The revisions will give Sebi the flexibility to take harsh action when warranted and take more lenient action where factors are favouring the intermediary, its key managerial personnel, etc.” “It was important to remove the five-year default ban as it was creating practical challenges. It was taking away flexibility from Sebi and damaging parties against whom such prohibition was not intended,” Sukhramani added. Read more