Introduction to Compliance

Introduction to Compliance (Part 1)

Compliance Definition: 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 involves a set of actions taken by registered intermediaries and issuer companies to comply with rules, 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 Compliance Officer is a person designated by a regulated entity to monitor compliance with the provisions of the SEBI Act, 1992, rules, and regulations. The CO is responsible for redressal of investors' grievances and monitoring compliance with the rules, regulations, and bye-laws of concerned stock exchanges or the Registrar of Companies.
Role and Responsibilities of CO: The CO's role includes:
- Monitoring compliance with SEBI regulations and rules
- Redressal of investors' grievances
- Reporting non-compliance to SEBI and the Board of Directors (BoD)
- Ensuring internal standards and policies are in place to protect the firm from liability
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.
Importance of Independence for COs: The CO should function independently to ensure effective compliance and minimal gap between regulatory intent and compliance.
Reporting Responsibility of COs: The CO is responsible for:
- Mandatory reporting: periodic submission of reports as per regulations
- Critical reporting: immediate and independent reporting of non-compliance to SEBI and the BoD
Compliance Requirements under SEBI (CAPSM) Regulations, 2007: The regulations delegate powers and functions to the National Institute of Securities Markets (NISM), including putting in place and implementing the certification process for associated persons in the securities market.

Introduction to Compliance (Part 2)

Obtaining a Certificate: A person can obtain a 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 (applicable to Principals).
Eligibility Criteria:
- 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 or completing a related CPE Program.
- All other persons may obtain the certificate by passing the relevant certification examination.
Validity Period of Certificate: The certificate is valid for 3 years from the date of grant or revalidation.
Continuing Professional Education Requirements:
- The certificate can be revalidated for 3 years by successfully completing a CPE Program or passing the relevant NISM Certification Examination.
- Different categories of persons may get their certificate revalidated through different methods, including passing the relevant certification examination or completing a related CPE Program.
Revalidation Methods:
- A Principal may get their certificate revalidated by passing the relevant certification examination, completing a related CPE Program, or delivering at least four sessions in a specific CPE program.
- A person other than a Principal, who has attained 50 years of age or has 10 years of experience, may get their certificate revalidated by passing the relevant certification examination or completing a related CPE Program.
- All other persons may get their certificate revalidated by passing the relevant certification examination or completing a related CPE Program.