(1) Any group or association of intermediaries, which is desirous of being recognized as a Self Regulatory Organization, may form a company registered under section 25 of the Companies Act, 1956 and such company may make an application to the Board for grant of certificate of recognition as a Self Regulatory Organization:
5[Provided that for the purpose of this sub-regulation a distributor shall be deemed to be an intermediary]:
6[Provided further that the Board may, in case of distributors engaged by asset management companies of mutual funds, grant certificate of recognition to only one group or association making an application under this regulation.]
(2) Every application made by such company under sub-regulation (1) shall contain such particulars as may be specified and shall be accompanied by a copy of the governing norms 5 Inserted by the SEBI (Self Regulatory Organizations) (Amendment) Regulations, 2013 w.e.f. 07.01.2013 6Inserted by the SEBI (Self Regulatory Organizations) (Second Amendment) Regulations, 2013 w.e.f.
18.11.2013 of Self Regulatory Organization and also a copy of the memorandum and articles of association relating in general to the constitution of the Self Regulatory Organization and in particular, to -
(a) Board of Directors of Self Regulatory Organization, its constitution and powers of management and the manner in which its business would be transacted;
(b) the powers and duties of the office bearers of Self Regulatory Organization;
(c) the admission into the Self Regulatory Organization of members, agents, their qualifications for membership, and the exclusion, suspension, expulsion and readmission of members therefrom or thereinto;
(3) Every application under sub-regulation (1) shall be signed on behalf of the applicant under authority of its Board of Directors by its Chairman, Managing Director, Chief Executive Officer or whole time director.
(4) Every application under sub-regulation (1) shall be made to the Board in Form A of the first schedule and shall be accompanied by a non-refundable application fee, as specified in Part A of the second schedule, to be paid in the manner specified in Part B thereof.
Eligibility criteria.
4. The Board shall not consider an application for grant of a certificate under regulation 3 unless the applicant satisfies the following conditions, namely:-
(a) the applicant is a company which has been granted license under section 25 of Companies Act, 1956;
(b) the applicant has, in its memorandum of association, specified admission of members and discharging the functions of Self Regulatory Organization as one of its main objects;
(c) the applicant has a minimum networth of one crore rupees;
(d) the applicant has adequate infrastructure, to enable it to discharge its functions as a Self Regulatory Organization in accordance with the provisions of the Act and these regulations;
(e) the applicant referred to in regulation 3 and its directors have the professional competence, financial soundness and general reputation of fairness and integrity to the satisfaction of the Board;
(f) neither the applicant, nor any director of the applicant is involved in any legal proceeding connected with the securities market, which may have an adverse impact on the interests of the investors;
(g) neither the applicant, nor any director has at any time in the past been convicted of any offence involving moral turpitude or any economic offence;
(h) the applicant has, in its employment, persons having adequate professional and other relevant experience to the satisfaction of the Board;
7[(i) the applicant is a fit and proper person based on the criteria specified in Schedule II of the Securities and Exchange Board of India (Intermediaries) Regulations, 2008;]
(j) grant of certificate to the applicant is in the interest of investors and the securities market.
8[Grant of in-principle approval.
4A. Where the applicant is not in compliance with the provisions of clauses (c), (d) or (h) of regulation 4, on the date of submission of the application under regulation 3, the Board may grant an in-principle approval to the applicant, which shall be valid for a period of one hundred and eighty days, within which the applicant shall ensure compliance with all provisions of regulation 4:
Provided that the Board may, upon sufficient cause shown by the applicant, extend the validity of the in-principle approval for a further period not exceeding ninety days.]
7Substituted by the SEBI (Self Regulatory Organisations) (Second Amendment) Regulations, 2013 w.e.f. 18.11.2013.
Prior to its substitution, clause (i) read as under:
“(i) the applicant, in all other respects, is a fit and proper person for the grant of a certificate;” 8 Inserted by the SEBI (Self Regulatory Organizations) (Second Amendment) Regulations, 2013 w.e.f. 18.11.2013.
Grant of recognition as a Self Regulatory Organization.