Code of Conduct & Institutional mechanism for prevention of Fraud or Market Abuse
Summary
This circular mandates Market Intermediaries (MIIs) to establish a Code of Conduct and an Institutional Mechanism for preventing fraud or market abuse. It requires MIIs to formulate specific codes, designate compliance officers, and implement internal controls under the supervision of their Boards and Regulatory Oversight Committees. The directive is issued under Section 11(1) of the SEBI Act, 1992, with immediate effect.
Text
Pursuant to the report of the Committee on Fair Market Conduct, necessary changes have been carried out in SEBI (Prohibition of Insider Trading) Regulations, 2015.
The Code of Conduct and Institutional Mechanism for prevention of fraud or market abuse shall be applicable to Stock Exchanges, Clearing Corporations and Depositories (MIIs).
MIIs shall formulate a Code of Conduct to regulate, monitor and report trading by their designated persons and immediate relatives... by adopting the minimum standards set out in Schedule C to the PIT Regulations.
Managing Director (MD) / Chief Executive Officer (CEO) of the MII shall be obligated to frame the referred code of conduct. The Board of Directors may ensure the compliance by MD / CEO in this regard.
A listed MII shall adopt minimum standards as set out in Schedule B of PIT regulations with respect to trading in its own securities and in Schedule C with respect to trading in other securities.
MII shall identify and designate a compliance officer to administer the aforesaid code of conduct.
The Board of Directors of MII, in consultation with the aforesaid compliance officer, shall specify the designated persons to be covered by the code of conduct on the basis of their role and function...
MIIs shall put in place an Institutional Mechanism for prevention of fraud or market abuse covering the following:
MD / CEO of the MII shall put in place adequate and effective system of internal controls to ensure compliance with the regulations and circulars... to prevent fraud or market abuse...
The Board of Directors of the MII shall ensure that the MD / CEO ensures compliance... The compliance officer... shall administer the internal controls to prevent fraud or market abuse...
The Regulatory Oversight Committee of the MII shall review compliance with the provisions of this Circular at least once in a financial year and shall also verify that the systems for internal control are adequate and are operating effectively.
MII shall formulate written policies and procedures for inquiry in case of suspected fraud or market abuse... which shall be approved by its Board of Directors.
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Source: SecMarx — Code of Conduct & Institutional mechanism for prevention of Fraud or Market Abuse. Verbatim text is public record; SecMarx structuring (linkage to applying orders) is cited to us.