Code of Conduct & Institutional mechanism for prevention of Fraud or Market Abuse: SEBI Circular 

The statutory body SEBI was founded on 12.04.1992, having headquarters in Mumbai. The said body is entrusted with the facility to manage and administer the national capital markets. Also, SEBI is responsible for monitoring the stock exchange and for protecting the interests of investors by implementing different rules and regulations for the benefit of the people. 

Further, the Securities and Exchange Board of India has the following objectives:

• To ensure systematic manner;
• To infuse more transparency within the environment;
• To minimize the cases of malpractices;
• To promote the event of capital markets;

Eligible entities for Code of Conduct as well as Institutional Mechanism for preventing fraud and market abuse:

The entities eligible are as follows :

• Stock Exchanges;
• Clearing Corporations;
• Depositories;

Code of Conduct for Eligible Entities

The key provisions governing the Code of Conduct for Eligible Entities are often summarized as:

• Formulation of Code of Conduct: All the entities eligible got to formulate a Code of Conduct (COC) to regulate, monitor, and report the trading activities undertaken by their designated persons (DP). The reason for an equivalent is to realize compliance with the SEBI (Prohibition of Insider Trading) Regulations 2015 by adopting the minimum standards prescribed in Schedule C to the said regulations;
• Authority to Formulate Code of Conduct: The MD (Managing Director)/ CEO (Chief Executive Officer) of those entities are obligated to border the said code of conduct. Further, it shall be noted that the Board of Directors (BOD) may ensure compliance by the MD and CEO in this regard;
• Appointment of Compliance Officer: To administer the compliance of the framed Code of Conduct, the entities got to appoint and designate a Compliance Officer;
• Specify Designated Persons: Further, the Board of Directors (BOD) of those entities, in consultation with the appointed compliance officer will get to specify the designated persons (DP) to be covered by the said code of conduct. Also, an equivalent will include the designation or position as mentioned in Regulation 9 (4) of the SEBI (Prohibition of Insider Trading) Regulations 2015;

Establishment of Institutional Mechanism for Prevention of Fraud or Market Abuse:

The main provisions are as follows:

• Responsibility of the MD or CEO to determine a Mechanism: It shall be noted that the MD or CEO of the entities mentioned must establish an efficient mechanism for control. The rationale behind an equivalent is to make sure due to compliance with the circulars and regulations issued by the SEBI from time to time and to stop the cases of any cheating or abuse by any entities or persons.
• Duties of Board of Directors and Compliance Officer: The Board of Directors must make sure that the director or Chief military officer of the organization duly suits Para 3 and Para 4.1. Further, the Compliance Officer of the respective entities got to administer and regulate the interior controls to prevent the cases of fraud or market abuse by the designated persons;
• Regulatory Oversight Committee: The Regulatory Oversight Committee (ROC) of the entities are going to be liable for reviewing the compliance with the provisions of the Circular. Such a review process must happen a minimum of once during a financial year. Also, such a committee will verify that the mechanism for control is proper and is operating effectively and efficiently.
• Formation of Written Policies: All the entities specified will be drafting written policies, plans, and procedures for conducting an inquiry within the case of alleged fraud or market abuse by their designated persons (DP) and immediate staff of the said designated persons.

          However, it shall be noted that such an idea, policies, and procedures must be approved by the Board of Directors.

          Further, any inquiry or investigation conducted against the designated persons and their immediate relatives could also be undertaken under the direction and supervision of the Regulatory Oversight  

         Committee.

          Also, it shall be noted that to make sure maximum transparency and fairness, the Regulatory Oversight Committee will comprise of PIDs and Independent External experts;

• Initiation of Inquiry: After becoming conscious of any unethical or illegal practice, the entities specified got to initiate an appropriate inquiry. Also, these entities will inform their BOD (board of directors)about such suspected fraud or market abuse.
• Effective Whistle Blower Policy: All the entities must possess an efficient whistleblower policy to permit their stakeholders, comprising of employees, to freely communicate their grievances and concerns regarding illegal or unethical practices. Also, they will report the instances of fraud, or market abuse, or any suspicion of fraud, or market abuse;
• Provides Adequate Protection: The entities got to make sure that the policy or plan framed under the provisions of Para 4.6 offers adequate protection against any termination, discharge, demotion, threats, suspension, harassment, directly or indirectly, or any kind of discrimination against any employee who makes any such complaint.

Directions for Eligible Entities

The directions for eligible entities are as follows:

• All the entities are instructed to do the required steps for the implementation of the circular. Further, an equivalent comprises of the specified amendments, pertinent bye-laws, rules, and regulations. Also, the entities are required to disseminate the small print of an equivalent on their official website;
• Also, they have to show the status of implementation of the circular by way of their Monthly Development report back to SEBI;

Conclusion:

In a nutshell, SEBI may be a statutory body liable for regulating and administering the New Delhi Markets. Also, it's liable for protecting and safeguarding the interest of the overall public.

Further, to extend the responsibility of the management or designated persons, within the case of negligence or failure, SEBI has made necessary changes within the SEBI (Prohibition of Insider Trading) Regulations 2015. An equivalent has been done by notifying the Code of Conduct & Institutional Mechanism for the Prevention of Fraud or Market Abuse.

Footnotes 

https://www.sebi.gov.in

https://www.swaritadvisors.com 

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.