Won’t insist on ‘fit and proper’ compliance till 30 Aug: Sebi
MUMBAI : The Securities and Exchange Board of India (Sebi) on Wednesday deferred the implementation of its “fit and proper" person criteria for intermediaries, informing the Bombay High Court that it will not insist on compliance till 30 August. Sebi had given the intermediaries time till 2 August to comply with the circular.
In November 2022, Sebi had notified amendments to Schedule II of the (Intermediaries) Regulations. The ‘Schedule II’ deals with the ‘fit and proper’ criteria to be followed by intermediaries registered with Sebi.
The matter came to light after various market intermediaries including Motilal Oswal, Anand Rathi, Ventura Securities, KR Choksey Shares and Securities, CD Equisearch, and LKP Securities, among others, approached the high court, challenging the constitutional validity of the specific clause on ‘fit and proper’. Amendments notified in Schedule II of the regulations under clause 3(b) (i) and (ii) state that principal officers, directors, managing partners, compliance officers and key managerial persons will attract disqualification from being ‘fit and proper’, the moment a chargesheet is filed by an enf-orcement agency for a matter concerning economic offence.
The intermediary is mandated to replace such a person within 30 days while also ensuring divestment of their stake within six months. In its petitions before the high court, the intermediaries said that such provisions by Sebi are “manifestly unreasonable, arbitrary, unfair, forbiddingly excessive, extremely wide in scope and applicability, and create an unreasonable restriction".
The regulations seek to disqualify persons from participating in the securities market merely on the basis of accusations. The petitions state that the
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