The Securities and Exchange Board of India (“SEBI”), vide circular SEBI/HO/MRD1/DTCS/CIR/P/2021/590 dated July 5, 2021 (“Circular”) has issued a set of Standing Operating Procedures (“SOP”) for handing of technical glitches by Market Infrastructure Institutions (“MII”), and a structure for imposition of ‘financial disincentives’ on MIIs for any downtime or unavailability of services beyond a pre-defined time period (“Financial Disincentive”).
The SOPs, contained in Annexure I to the Circular, define a ‘technical glitch’ to mean any malfunction in the systems of an MII, which include malfunction(s) in (i) hardware, (ii) software, or (iii) any products/services provided by the MII, whether on account of inadequate infrastructure/systems or otherwise, which may lead to either stoppage or variance in the normal functions/operations of the MII. On occurrence of a technical glitch, the SOPs provide a structure for reporting such technical glitch by the MII to SEBI. In the event an incident results in a ‘business disruption’, which is defined to mean either a stoppage or variance in the normal functions/operations of systems of the MII which impacts normal service delivery of the MII, the MII shall submit to SEBI such information listed in Annexure I.
Annexure II to the Circular provides for Financial Disincentives to be imposed on MIIs automatically under pre-defined conditions specified in Annexure II to the Circular, with such amount being credited to the Investor Protection Fund/Core Settlement Guarantee Fund maintained by the MII. MIIs include stock exchanges, clearing corporations and depositories.
The MII shall be required to submit a compliance report to SEBI within 90 (ninety) days of occurrence of a ‘Disaster’ (as defined in SEBI Circular SEBI/HO/MRD1/DTCS/CIR/P/2021/33 dated March 22, 2021) or business disruption, including details regarding the payment and computation of the Financial Disincentives.
Please find a copy of the Circular here.
This update has been contributed by Suchita Ambadipudi (Partner) and Pranav Pillai (Associate).
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