Automating SEBI Compliances End-to-end

Earlier this year, for the first time, India made it to the coveted list of world?s top five economies by market capitalization. At $3.2 trillion in m-cap, it surpassed developed economies like the UK and Canada. Its capital market has expanded tremendously, hosting over 7,000 listed entities and 100 million demat accounts. The country?s stock market regulator, SEBI (The Securities and Exchange Board of India), plays a key role in effective functioning of the market. It uses a wide array of rules and regulations to foster an environment of free, fair and transparent trading and preserve the integrity of the market.

It is estimated that there are over 2,000 unique compliances under various SEBI rules and regulations. At least 433 among them are applicable to all listed companies. These include compliances under the SEBI (Listing Obligations and Disclosure Requirements) Regulations, 2015 and SEBI (Prohibition of Insider Trading) Regulations, 2015, among others. There are additional compliance requirements for substantial acquisition of shares, buy-back of securities, and issue of capital and disclosure requirements. Furthermore, there are a host of compliances applicable to specific types of listed entities such as Mutual Funds, Real Estate Investment Trusts, Portfolio Managers, Foreign Portfolio Investors, and Alternative Investment Funds.

On a granular level, the nature of compliances is wide-ranging. At the outset, there are a variety of on-going compliances relating to composition of board, committees, quorums, directorship, and meetings. In addition, various types of filings must be made to SEBI, stock exchanges and depositories in both PDF and XBRL formats. A large number of filings are triggered on specific events such as conversion of share certificates from physical to dematerialisation, draft letter of offers, and annual submissions for off-shore derivative instruments. Other critical compliance obligations of listed companies include periodic payments of fees, maintenance of records and management of disclosures.

Unfortunately, ad-hoc, manual, and paper-based processes form the basis of compliance management in most listed entities. This leads to inadvertent delays, defaults and lapses creating financial and reputational risks. Even minor non-compliance can create a perception of weak corporate governance and affect share prices.

Digital technologies have taken the world by storm. The new class of regulatory technology companies are offering end to end automation of SEBI compliances including tracking and management, data processing, preparation of statutory filings, maintenance of digital records and automated flagging of potential non-compliances.  These solutions allow listed entities to migrate to digitisation of their entire data and process flow. They can automatically detect defaults and delays. Additionally, these solutions come integrated with regulatory updates to ensure timely and accurate compliance. They offer centralised document upload, generation in PDF and XBRL formats, approval and archival capabilities in line with the SEBI rules and regulations. In addition, smart software solutions flag trading windows, compliance to structured digital database (?SDD?) requirements, performance evaluation of board members, executive directors and independent directors, and prompt payments of annual listing fee for securities.

As the country?s capital markets become stronger and deeper, end to end data journey from a listed entity to the regulator and back has to become fully digital. A framework with open APIs from the regulator will enable straight through filings, communication of regulatory changes and requests for information.

India has set its sight on becoming a 10 trillion-dollar economy within the decade. Capital markets will play a pivotal role in capital formation. Protecting integrity and fostering trust in the market is imperative now more than ever. Timely, seamless and error-free compliance will pave the way. Digital tools and technologies need to become an ally in this journey.


The author is Co-Founder & CEO, TeamLease Regtech, A TeamLease group 

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