Sebi Eases Penal Actions for Technical Glitches in MIIs

Sebi has announced that financial penalties for technical glitches in Market Infrastructure Institutions (MIIs) will be imposed only on MIIs, not their MDs or CTOs. MIIs will also have the opportunity to explain the cause of glitches before penalties are enforced. The new framework came after recommendations aimed at promoting ease of business.

In a significant policy shift aimed at easing penal actions for technical glitches, Sebi announced on Friday that financial penalties will now be imposed solely on Market Infrastructure Institutions (MIIs) rather than their Managing Directors (MDs) or Chief Technology Officers (CTOs).

According to Sebi's latest circular, MIIs—which include stock exchanges, clearing corporations, and depositories—will have the opportunity to explain the causes of technical glitches before any penalties are enforced. The new framework emerges after Sebi received recommendations from various committees and MIIs to review the imposition of financial disincentives on individuals. The move is intended to promote ease of doing business within these institutions.

Sebi emphasized that the operations of MIIs are increasingly becoming system-driven, relying heavily on complex IT systems involving multiple vendors and service providers. The regulator discusses the difficulty of ascertaining individual responsibility for technical glitches, noting that it would require a nuanced and detailed assessment. MIIs are now required to submit a report within 90 days of any disruption, detailing the financial penalties paid, and disclose the information on their websites, annual reports, and to investors if listed. The new framework takes effect immediately.

(With inputs from agencies.)