On 8-3-2-2024, the Securities and Exchange Board of India (‘SEBI’) issued Securities and Exchange Board of India (Index Providers) Regulations, 2024 mandating Registration of every Index Provider. The provisions will come into force on the 118th day from 8-3-2024.
Key Points:
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Applicable only to Index Providers (‘IPs’) that administer Significant Indices consisting of securities listed on recognized stock exchange in Indian securities market.
Exception: not applicable to IPs administering Indices:
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Only of global asset classes;
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Global assets and Indian securities whether for use in the Indian securities market or elsewhere;
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In a foreign jurisdiction.
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Application for grant of certificate of registration:
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Every IP needs to have a certificate of registration issued by the Board.
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Any unregistered IP, falling within the scope of these Regulations, can continue or carry its activities only:
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for a period of 6 month from the date of commencement of these regulations; or
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If it has applied for registration within 6 months.
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Along with the application, the applicant will submit a compliance assessment report, issued during preceding 12 months by an independent external auditor, conforming adherence to International Organization of Securities Commissions Principles for Financial Benchmarks.
In case of failure to submit such report, the applicant will provide the reasons to the Board with an undertaking to submit the report within 6 months from the date of grant of certification of registration.
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Eligibility:
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Applicant should be an entity incorporated under Companies Act, 2013 or should be incorporated with an equivalent legislation in the country of incorporation; or
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Applicant has a minimum net worth of Rs. 25 crores or an equivalent amount in the currency of the country in which the applicant is incorporated.
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Applicant has a proper infrastructure and adequate number of human resources.
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Grant of certificate of registration: The Board can grant the certificate in Form B of 1st Schedule, sending a intimation to the applicant, which will be valid unless suspended/ cancelled by the Board.
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Fees-
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For Application for grant of registration- Rs. 50, 000
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For Registration– Rs. 25.00,000
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For Recuring Registration (for every 3 years)- Rs. 15,00,000
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In case the certificate is not granted by the Board, the decision and the grounds for rejection should be communicated to the applicant within 30 days of the decision.
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Oversight Commitee:
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It will be constituted to govern all aspects of benchmark determination process.
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The committee will be separate and distinct from the department dealing with day-to-day process if Index calculation and maintenance
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Duties:
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Review the need for change in the Index design or computation methodology;
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Oversee benchmark design and introduction of new financial benchmarks, results of audit and direct implementation of remedial actions recommended by those audits;
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Review procedures for cessation of an Index;
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Oversee standard procedures followed in the exercise of Expert Judgement;
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Periodical Review;
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Examine methodology.
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A Control Framework will be put in place for calculating, maintaining and disseminating the Index
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Under this control framework, an effective Whistle- Blowing Mechanism will be placed to facilitate early awareness of potential misconduct and support the making of disclosures by such employees who observe any unethical practice or grave misconduct.
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In case of default, the IP will be liable for action under SEBI (Intermediaries) Regulations, 2008.
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Forms introduced:
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First Schedule: Form A– Application for grant of Certificate of Registration
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First Schedule: Form B– Certificate of Registration
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Second Schedule: Part A– Amount to be paid as Fees
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