SEBI Fit and Proper Framework: Review for Intermediaries
Why in the news
SEBI wants to rework the suitability test applied to market intermediaries. It feels some current provisions are too harsh and rigid when proceedings have only just begun.
Key facts
- Regulator: SEBI.
- Legal basis: Schedule II of the SEBI (Intermediaries) Regulations.
- Persons tested: intermediaries, plus their promoters, directors and key management personnel.
- Four yardsticks: integrity, reputation, competence, financial soundness.
About the framework
It is a regulatory test used to decide whether an intermediary and its top people are suitable to work in the securities market.
Reasons for the review
- About five years of enforcement experience has exposed unintended effects.
- Market participants pointed to heavy compliance burdens.
- They also warned of irreparable reputational and business damage from early disqualification.
- SEBI also studied global best practices.
Exam angle
- Test name: fit and proper framework.
- Governing rules: SEBI (Intermediaries) Regulations, Schedule II.
- Concern: provisions seen as punitive at a preliminary stage.