The Securities and Exchange Board of India (SEBI) has proposed a new regulation requiring regulated entities to maintain detailed records of their communications with stakeholders. Through a consultation paper released on Thursday, SEBI seeks public responses to this proposal by September 13.
SEBI’s proposed regulation aims to enhance transparency and accountability by ensuring that financial entities such as stockbrokers, mutual funds, merchant bankers, and others maintain comprehensive records of all mandated communications.
To implement these changes, SEBI plans to amend several existing regulations that currently govern different financial entities, including debenture trustees, custodians, credit rating agencies, collective investment schemes, and more. The amendment would mandate that these entities maintain a legally verifiable record of all communication that is required under the regulations and circulars.
Under the proposed rule, entities would be required to keep these records for a minimum of eight years from the date of the communication. This long-term preservation would create an audit trail, enabling SEBI and other stakeholders to verify compliance and identify any breaches of securities laws.
The consultation paper highlights that these records will be limited to a specific class of mandatory communications that are currently required under securities laws. The aim is to ensure that critical information remains available for regulatory review without placing an excessive burden on businesses.
SEBI’s proposal is intended to provide a legally verifiable record of communications, which would be helpful in resolving investor grievances, protecting investor interests, and identifying any violations of securities laws. The regulator believes that this will lead to improved compliance, greater transparency, and increased confidence among investors in the securities market.
The consultation paper emphasizes that maintaining such records will make it easier for regulators to track whether companies and financial entities are following the rules and providing all required information To ensure that stakeholders are kept informed promptly and with precise information.
While the proposed rule aims to enhance investor protection and ensure better regulatory compliance, there are concerns about the potential impact on businesses, especially smaller firms. Maintaining detailed records for eight years could require additional resources, such as storage facilities and staff, leading to increased costs for regulated entities.
Some industry participants have expressed worry that the new rule could create a significant administrative burden, particularly for entities that already operate with limited resources. However, SEBI has clarified that the proposed rule will apply only to a limited class of mandatory communications, which may help reduce the burden.
The proposed regulation by SEBI represents a significant step towards enhancing transparency and accountability in India’s financial sector. If implemented, it would require regulated entities to maintain records of their communications for at least eight years, providing a valuable tool for monitoring compliance and protecting investor interests.
