Sebi proposes mandate for regulated entities to maintain stakeholder communication records

Should the market regulator mandate its regulated entities to maintain records of communication with stakeholders, the Securities and Exchange Board of India (Sebi) has proposed through a consultation paper on Thursday, and seeking responses by 13 September.

Sebi has proposed that regulated entities maintain a record of all communication mandated to be communicated under the respective governing regulations and the circulars. To enable this, the regulator proposes to amend a bunch of regulations concerning stockbrokers, merchant bankers, debenture trustees, bankers to an issue, mutual funds, custodians, credit rating agencies, collective investment scheme, foreign venture capital investors, self-regulated entities, alternate investment funds as also KYC regulations.

The regulator has proposed that the entities ought to maintain a record of the communications for not less than eight years from the date of communication.

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Sebi-regulated entities are mandated to communicate various types of information to numerous stakeholders, under the current regulatory regime. “This enables a regular and timely disbursal of information to the relevant stakeholders. However, the record of such mandatory communication must be maintained only for a limited class of communication,” the paper specified.

To be sure, the records of the relevant documents that are mandated to be preserved under the securities laws serve as an audit trail to identify breach of the securities laws. However, where the relevant statutory information is required to be communicated, the content is difficult to ascertain unless mandated to be preserved or maintained.

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The paper specified that only a limited class of mandatory communication must be maintained.

“The legally verifiable record of mandatory communication would help in resolving investor grievances, protecting the interest of investors and identifying instances of breach of provisions of the securities laws, if any, by providing the relevant evidence of the content of such communication. This would lead to improved regulatory compliance, increase transparency, protect investors’ interest and boost their confidence in the securities market,” the paper said.

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