Sebi to penalise bourses, top execs Rs 1 lakh a day for technical glitches

Fine kicks in if there is delay in submission or incomplete submission of root cause analysis(RCA) report within 21 days of the incident

Topics

SEBI | stock exchange


Samie Modak  | 
Mumbai 

Market regulator Sebi on Monday issued a detailed framework for penalising market infrastructure institutions (MIIs)— which includes stock exchanges, clearing corporations and depositories— for technical glitches.

“MIIs are systemically important institutions as they provide infrastructure necessary for the smooth and uninterrupted functioning of the securities market….For any downtime or unavailability of services, beyond such predefined time, there is a need to ensure that ‘financial disincentive’ is paid by the MIIs as well as managing director (MD) and chief technology officer (CTO) of the MII. This will encourage MIIs to constantly monitor the performance and efficiency of their systems and upgrade/ enhance their systems etc. to avoid any possibility of technical glitches/disruption/disaster and restart their operations expeditiously in the event of glitch/disruption/disaster,” Sebi said in a circular.

Under the new framework, MIIs will have to pay Rs 100,000 per day in case of delay in submission or incomplete submission of root cause analysis (RCA). The regulator has said a comprehensive RCA report needs to be submitted within 21 days of the incident.

Meanwhile, failure to timely address technical glitch will attract Rs 200,000 per day for the first 15 days, Rs 300,000 per day for subsequent 15 working days and beyond 30 working days Rs 25 lakh additional.

Failure to declare disaster within stipulated timelines could attract financial disincentive of 10% of average of standalone net profit for previous two financial years or Rs 2 crore, whichever is higher on the MII. While the MD and CTO will have to part 10 per cent each of their annual pay (both fixed and variable components) for the financial year when the disaster occurred.

Failure to restore operations within a recovery time objective may attract similar penalties both on the MII as well as the MD and CTO.

In the event of a disaster, the MII has to restore its operations, including critical systems, from a disaster recovery site within 45 minutes.

There will be further penalties for failing to restore operations of critical systems including from disaster recovery site within three hours.

Sebi has said in the event of any business disruption, which is not required to be declared as “disaster”, the MII fails to restore normalcy of operations within 75 minutes of the incident, it will attract penalty of Rs 50 lakh and if the same extends beyond three hours, the penalty will increase to Rs 1 crore.

Sebi has tightened the rules around technical glitches following a trading outage at the NSE in February 2020. The NSE glitch had led to a trading halt that lasted several hours and resulted in huge losses for traders. The finance ministry had taken cognizance of the issue and asked Sebi to avoid a repeat of the incident.

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