On 8th March, 2024 the Securities and Exchange Board of India (‘SEBI’) issued Securities and Exchange Board of India (Index Providers) Regulations, 2024 mandating Registration of every Index Provider.
Index providers are institutions responsible for creating and managing indices. A key function of an index provider is to classify and define markets, as their indices represent entire markets or segments of them, serving as benchmarks for performance. They establish the rules for which securities are included in each index, determine how the indices are managed, and decide the criteria for adding or removing securities over time.
Applicability
Scope- For Index Providers managing Significant Indices with Indian-listed securities.
Exclusions - Does not apply to indices with only global assets or those used solely in foreign jurisdictions.
Preceding Legislation
SEBI Intermediaries Regulation, 2008: Included Index Providers but lacked specific oversight.
SEBI Act, 1992- Defines intermediary registration requirements.
Key Aspects
1.Registration: Requires eligibility-based registration.
2. Governance: Rules for governance, code of conduct, and an Oversight Committee.
3. Conflict of Interest: Requires policies to manage conflicts and ensure independence.
4. Control Framework: Documentation for index calculation and dissemination.
5. Special Audits: Allows board-directed audits with specific obligations.
6. Index Quality: Standards for quality, cessation, and data controls.
7. Compliance Officer: Requires a Compliance Officer for regulation adherence.
8. Default Action: Rules for managing defaults and non-compliance.
9. Relaxations: Provides certain exemptions and relaxations.
Schedules
1. Schedule I: Application and certificate forms.
2. Schedule II: Fee structure and payment details.
3. Schedule III: Code of conduct.
Conclusion
The SEBI Index Providers Regulations, 2024, establish comprehensive oversight for Index Providers, filling previous regulatory gaps and ensuring market stability and transparency.
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