In recent decades, cases of financial fraud have been a regular affair in India. Post-liberalisation the complexity and frequency of frauds have increased many times resulting in a very serious cause of concern for regulators such as the Security and Exchange Board of India (SEBI). Corruption, if not treated timely works as cancer for any sector, be it government-owned or a private one and the Indian economy, to a great extent suffers from this problem. It serves as the main motive to enact new laws and regulate the market by market regulator SEBI.

SEBI has recently made necessary changes in the Prohibition of Insider Trading (PTI) Regulations 2015 to ensure accountability of the administration and appointed person, in the case of failure and carelessness. Stock Exchanges, Clearing Corporations and Depositories are some entities eligible for the Code of Conduct and Institutional Mechanism for the prevention of Fraud or Market Abuse.

The code of conduct talks about the following main provisions:

Code of conduct formulation:

The above-stated entities are required to formulate a Code of Conduct to manage, monitor, and publish the dealing undertook by their designated persons and the immediate relatives of these designated persons. The Managing Director or CEO of these entities are bound to frame a code of conduct.

Compliance officer and Board of directors:

The appointed compliance officer will administer and monitor the compliance of the framed Code of Conduct. The Board of Directors will ensure that the Managing Director or Chief Executive Officer of the corporation appropriately comply with all the policies and regulations.

Duty of CEO and MD:

The MD or CEO of the above-stated entities is required to build an efficient mechanism for internal control to ensure compliance with the regulations issued by the SEBI to prevent cases of fraud or market abuse.

Whistleblower policy:

An effective whistleblower policy will allow its stakeholders and employees to express their concerns about any illicit or unethical practices. They can also report cases of fraud or market abuse or any suspicion of the same.

The Regulatory Oversight Committee (ROC):

ROC will be responsible for examining compliance with the guidelines which must take place at least once in a fiscal year. The committee will also check that the mechanism for internal control is up to the mark and are functioning efficiently. The committee will include PIDs and Independent External experts.

Written policies:

The above-stated entities need to draft written policies and procedures approved by the Board of Directors for conducting a probe in the case of alleged fraud or market abuse. Interrogation or investigation conducted against the designated persons and their immediate relatives will be under the supervision of the Regulatory Oversight Committee.

Protection to the whistleblower:

The policies framed under the provisions must offer enough protection against any termination, removal, demotion, threats, harassment, either directly or indirectly against any employee who reports fraud or market abuse or any suspicion of fraud or market abuse.

The listed entities are advised to take immediate steps for implementation of the circular, including necessary amendments to the applicable laws, rules and regulations. The entities are also required to report the status of implementation of the circular through their Monthly Development Report to SEBI and broadcast the same on their web portals.

This Article Does Not Intend To Hurt The Sentiments Of Any Individual Community, Sect, Or Religion Etcetera. This Article Is Based Purely On The Authors Personal Views And Opinions In The Exercise Of The Fundamental Right Guaranteed Under Article 19(1)(A) And Other Related Laws Being Force In India, For The Time Being. Further, despite all efforts that have been made to ensure the accuracy and correctness of the information published, White Code Consulting & Governance shall not be responsible for any errors caused due to human error or otherwise.