1. Objective:
Ensure MIIs provide equal, unrestricted, transparent, and fair access to all market participants.
Address issues of transparency and fairness in charges levied by MIIs on their members.
2. Concerns:
Current volume-based, slab-wise charge structures can lead to overcharging end clients.
Discrepancies between daily charges collected from clients and monthly charges paid to MIIs.
Potential for misleading disclosures to clients about MII charges.
Existing structures can hinder equal and fair access, creating a level playing field issue due to size differentials among members.
3. New Principles for Charge Structures:
True to Label: Charges levied on end clients by members must match the charges received by MIIs.
Uniform Charge Structure: Charges should be uniform for all members, not dependent on volume or activity.
Consideration of Existing Charges: New structures should consider current per unit charges to benefit end clients with potential charge reductions.
4. Directives for MIIs:
Redesign charge structures and processes to comply with the new principles.
Implement necessary infrastructure, systems, and amendments to bye-laws, rules, and regulations.
Inform members and disseminate the circular on their websites.
Communicate implementation status to SEBI.
5. Effective Date:
The circular will be effective from October 01, 2024.
6. Regulatory Basis:
Issued under Section 11(1) of the Securities and Exchange Board of India Act, 1992, and relevant regulations to protect investor interests and promote securities market development.
Conclusion:-
The SEBI circular aims to enhance transparency, fairness, and equal access in the market infrastructure by mandating MIIs to adopt uniform charge structures and ensuring that charges levied on end clients are true to label. This initiative is expected to protect investor interests and promote a more equitable securities market environment.
Questions for Consideration:-
1. Implementation:
- How will MIIs redesign their existing charge structures to comply with the new principles?
- What specific infrastructure and system changes will be required to implement these directives?
2. Impact on Members and Clients:
- How will the new charge structures affect the financial dynamics for stock brokers, depository participants, and clearing members?
- What measures will be taken to ensure that end clients truly benefit from the changes?
3. Regulatory Compliance:
- What steps will MIIs need to take to amend their bye-laws, rules, and regulations in accordance with this circular?
- How will SEBI monitor and enforce compliance with the new directives?
4. Communication and Transparency:
- What strategies will MIIs employ to effectively communicate these changes to their members and the public?
- How will transparency in charge disclosures to end clients be improved under the new system?
These questions aim to address the practical implications and challenges of implementing the SEBI circular and to ensure that the intended benefits are realized effectively.
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