The Reserve Bank of India (RBI) has issued the framework for recognition of self-regulatory organisations (SROs) in financial markets.
Framework for recognition of self-regulatory organisations (SROs):
- Eligibility Criteria: To qualify as an SRO, the organization must be a not-for-profit company registered under Section 8 of the Companies Act, 2013, and must have a minimum net worth of ₹10 crore.
- Responsibilities: SROs are required to regularly update the RBI on sector developments, perform tasks assigned by the RBI, and submit an annual report to the regulator.
- Additionally, they must establish and enforce a comprehensive code of conduct for their members, particularly focusing on supporting smaller entities within the financial markets.
- Role of SROs: SROs serve as intermediaries between their members and the regulator, ensuring compliance with regulatory guidelines, fostering innovation, protecting stakeholder interests, and promoting industry standards and best practices.
About Self-Regulatory Organisations (SROs):
- SROs are entities that promote self-regulation within financial markets by developing, enforcing, and ensuring adherence to industry standards and best practices among their members.
- They play a crucial role in easing access to markets, enhancing participation, and protecting users.
- SROs help reduce the regulatory burden on authorities like the RBI and SEBI by taking on responsibilities that include compliance monitoring, early warning signal development, and stakeholder protection.
About Regulated Entities (REs):
- Regulated Entities (REs) are financial institutions and organizations that operate under the regulatory framework established by authorities such as the RBI and SEBI.
- REs are responsible for maintaining financial stability, ensuring compliance with regulations, conducting due diligence, and implementing measures to prevent financial crimes, including money laundering and fraud.
- Examples: Scheduled commercial banks under RBI’s supervision and insurance repositories regulated by the Insurance Regulatory and Development Authority (IRDA).
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Frequently Asked Question:
What is a Self-Regulatory Organisation (SRO) in financial markets?
An SRO is an entity that promotes self-regulation by enforcing industry standards and best practices among its members in financial markets.
What are the eligibility criteria for an SRO under RBI’s framework?
An SRO must be a not-for-profit company registered under Section 8 of the Companies Act, 2013, with a minimum net worth of ₹10 crore.
How do SROs protect stakeholder interests?
SROs enforce codes of conduct and industry best practices, ensuring that smaller entities and other stakeholders are adequately supported and protected.
What are Regulated Entities (REs)?
REs are financial institutions and organizations operating under the regulatory framework set by authorities such as RBI and SEBI.