Sebi sets 3-stage process to monitor listed exchanges

Rules come as BSE gears up to list on bigger rival NSE on February 3

CLOSER OVERSIGHT

THE SECURITIES and Exchange Board of India (Sebi) on Friday announced a three-stage process to address any conflict arising out of listing of a stock exchange on another bourse, including closer oversight from an independent panel set up by the regulator.

The rules come as the BSE gears up to list on bigger rival National Stock Exchange (NSE) on February 3, after its Rs 1,243crore initial public offering (IPO) was oversubscribed by 51 times. Among the new measures, Sebi said exchanges might appeal to an independent panel at the bourse in which they are listed when it feels “aggrieved” by a source of potential conflict. The exchange can also submit any complaints to an independent panel to be set up by Sebi to provide “independent oversight and review” and to monitor potential conflicts on a regular basis.

Concerns over conflicts of interest rose after the NSE appealed to Sebi to be allowed to list on its own exchange, saying listing on another bourse would expose it to regulation by a rival. Sebi, however, rejected that appeal, and NSE last month went ahead with an application on the BSE. The application has not yet won Sebi approval.

NSE has also initiated its IPO process and filed draft papers with Sebi last month for the Rs 10,000-crore IPO.

At the first stage, the listing department of stock exchange, on which the listing is done, will be responsible for monitoring the compliance of the listed bourse, Sebi said in a circular. At the second level, the Independent Oversight Committee (IOC) of the listing exchange will exercise oversight to deal with the conflicts. The listed exchange can appeal to the IOC of the listing stock exchange, if aggrieved, with the decision on disclosure of the listing stock exchange.

At the third level, an independent Conflict Resolution Committee (CRC), constituted by Sebi with an objective for independent oversight and review, will monitor potential conflicts between listed and listing exchange on a regular basis. The listed exchange aggrieved by the decision of the IOC of the listing exchange may appeal to the CRC.

Meanwhile, NSE has asked trading members to furnish details of their key management personnel by June-end, a move aimed at greater supervision. The move comes after Sebi, in September, had put in place an enhanced supervision framework for stock brokers.

Under the guidelines, trading members are required to provide the details of their Key Management Personnel along with their PAN and any change thereof to the exchange. In a circular, NSE has directed trading members to update details of their top officials like chief executive officer, managing director, company secretary, whole-time director and chief financial officer.