Introduction to Compliance

Introduction to Compliance (Part 1)

Compliance: Refers to the act of conforming to a rule, such as a specification, policy, standard, or law. In the context of the securities market, it means a set of actions by which registered intermediaries and issuer companies comply with the rules and regulations, notifications, guidelines, and instructions issued by the Securities and Exchange Board of India (SEBI), stock exchanges, depositories, and other competent authorities.
Compliance Officer (CO): A person designated by a regulated entity to monitor compliance with the provisions of the SEBI Act, 1992, rules, and regulations, notifications, guidelines, and instructions issued by SEBI or the Central Government, and for redressal of investors' grievances.
Role of Compliance Officer: The CO is responsible for monitoring compliance with the SEBI Act, 1992, and rules and regulations, notifications, guidelines, orders passed, and instructions issued by SEBI or the Central Government, as well as the rules, regulations, and bye-laws of the concerned stock exchanges or Self-Regulatory Organizations (SROs).
Appointment of Compliance Officer: The appointment of a CO is mandatory for stock brokers and intermediaries, as per the SEBI (Stock Brokers) Regulations, 1992, and SEBI (Intermediaries) Regulations, 2008.
Responsibilities of Compliance Officers: The CO is responsible for ensuring compliance with regulatory requirements, monitoring internal standards and policies, protecting the firm from liability, and reporting non-compliance to the Board of Directors (BoD) and SEBI.
Importance of Independence for COs: The CO should function independently to ensure effective compliance and minimize the gap between regulatory intent and compliance.
Reporting Responsibility of COs: The CO is responsible for immediate and independent reporting of non-compliance to the BoD and SEBI, and for periodic submission of reports as per regulatory provisions.
Compliance Requirements under SEBI (CAPSM) Regulations, 2007: The regulations require associated persons in the securities market to obtain certification from the National Institute of Securities Markets (NISM), and specify the standards and qualifications for such certification.

Introduction to Compliance (Part 2)

Certificate Obtention Methods: A Principal may obtain the certificate by:
- Passing the relevant certification examination, as specified by NISM.
- Successfully completing a related CPE Program, as specified by NISM.
- Delivering at least four sessions in a specific CPE program, as specified by NISM.
Certificate Obtention for Non-Principals: A person other than a Principal, who has attained 50 years of age or has 10 years of experience, may obtain the certificate by:
- Passing the relevant certification examination, as specified by NISM.
- Successfully completing a related CPE Program, as specified by NISM.
Certificate Obtention for Other Persons: All other persons may obtain the certificate by:
- Passing the relevant certification examination, as specified by NISM.

Validity Period of Certificate

Validity Period: The certificate is valid for 3 years from the date of grant of the certificate or revalidation.
Revalidation: The certificate may be revalidated for 3 years upon expiry, provided the associated person successfully completes a programme of continuing professional education, as specified by NISM.

Continuing Professional Education Requirements

Revalidation Methods: Different categories of persons may get their certificate revalidated through different methods, including:
- Passing the relevant certification examination, as specified by NISM.
- Successfully completing a related CPE Program, as specified by NISM.
- Delivering at least four sessions in a specific CPE program, as specified by NISM (for Principals).
Revalidation Period: The certificate will be revalidated for three years from the date of expiry of the existing certificate.