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๐‘๐๐ˆ ๐ˆ๐ฌ๐ฌ๐ฎ๐ž๐ฌ ๐Ž๐ฆ๐ง๐ข๐›๐ฎ๐ฌ ๐…๐ซ๐š๐ฆ๐ž๐ฐ๐จ๐ซ๐ค ๐Ÿ๐จ๐ซ ๐ซ๐ž๐œ๐จ๐ ๐ง๐ข๐ฌ๐ข๐ง๐  ๐’๐‘๐Ž๐ฌ ๐Ÿ๐จ๐ซ ๐‘๐ž๐ ๐ฎ๐ฅ๐š๐ญ๐ž๐ ๐„๐ง๐ญ๐ข๐ญ๐ข๐ž๐ฌ

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Theย Reserve Bank of India (RBI)ย has recently introduced the framework for recognising Self Regulatory Organisations (SROs) for entities regulated by the RBI. Broadly, the framework has provided several criteria as below:
ย 
๐‚๐ก๐š๐ซ๐š๐œ๐ญ๐ž๐ซ๐ข๐ฌ๐ญ๐ข๐œ๐ฌ
ย 
An SRO must uphold credibility, objectivity, and responsibility under regulatory oversight to promote sectoral compliance and sustainability. It should have authority from membership agreements to set and enforce standards, ensure transparency and independence in governance, establish clear conduct rules, and enforce consequences for violations.
ย 
๐Ž๐›๐ฃ๐ž๐œ๐ญ๐ข๐ฏ๐ž๐ฌ
ย 
The SRO’s objectives include enhancing its represented sector by fostering compliance, innovation, and ethical conduct within the broader financial system. It aims to guide members towards professionalism and adherence to regulations while representing their collective voice impartially in engagements with regulatory bodies.
ย 
๐‘๐ž๐ฌ๐ฉ๐จ๐ง๐ฌ๐ข๐›๐ข๐ฅ๐ข๐ญ๐ข๐ž๐ฌ ๐ญ๐จ๐ฐ๐š๐ซ๐๐ฌ ๐Œ๐ž๐ฆ๐›๐ž๐ซ๐ฌ ๐š๐ง๐ ๐‘๐๐ˆ
ย 
The SRO holds several responsibilities towards its members, primarily aimed at promoting best business practices and protecting the interests of stakeholders. Additionally, the SRO is tasked with fostering collaboration with the regulator, keeping the RBI informed of sector developments, promptly reporting member violations, executing tasks assigned by the regulator, submitting annual reports and periodic returns, engaging in regular interactions, following regulator directives etc.
ย 
๐„๐ฅ๐ข๐ ๐ข๐›๐ข๐ฅ๐ข๐ญ๐ฒ ๐œ๐ซ๐ข๐ญ๐ž๐ซ๐ข๐š
ย 
To ensure the independence and integrity of the SRO and its ability to fulfill its objectives, applicants must meet specific eligibility criteria. They must be registered as not-for-profit companies under Section 8 of the Companies Act, 2013, with adequate net worth and diversified shareholding to prevent undue influence. The applicant should represent the sector or demonstrate plans to attain specified membership within a reasonable timeframe. Its directors must exhibit professional competence, fairness, and integrity.
ย 
๐†๐จ๐ฏ๐ž๐ซ๐ง๐š๐ง๐œ๐ž ๐…๐ซ๐š๐ฆ๐ž๐ฐ๐จ๐ซ๐ค
ย 
The governance framework of the SRO is essential for fostering confidence in the integrity of the sector, requiring transparency, professionalism, and independence in its operations. Key guidelines include: professionally managed operations outlined in Articles of Association (AoA)/bye-laws, criteria for member procedures, ‘fit and proper’ director criteria, adequate resources, and compliance with Reserve Bank directives.
ย ย 
A copy of theย Reserve Bank of India (RBI)ย framework is enclosed herewith.
ย 
Readers are welcome to share their views withย Regstreet Law Advisorsย onย info@regstreetlaw.com

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