“Career Insights: Regulatory and Compliance Services in India” by Dr. Prabhakar R. Patil

Speaker: Dr. Prabhakar R. Patil – Chief General Manager, SEBI

Moderator: Biharilal Deora, CFA, Director, CFA Society India

Contributed By: Monika Duggal, CFA, Member, Public Awareness Committee, CFA Society India

Regulatory compliance is recognised as a compulsion that the corporates need to adhere to. It is a set of rules, policies or laws ensuring that corporates follow the standards set for an industry by the respective authorities. There are a few examples of scandals – PNB, Yes Bank, Franklin Templeton Debt Funds – in the current scenario where we can clearly state the importance of stringent financial regulations and compliance to be strictly adhered to by corporates.

When it comes to corporate and financial compliance, the importance of risk management along with compliance cannot be ignored.

Every crisis reinforces the need for robust risk management and prudent regulation. Furthermore, the ongoing lack of public trust in financial services, compared to other industries, is a constant reminder of the need for diligent supervision.

A career in the regulatory and compliance sector is sometimes overlooked. In particular, people fail to recognise that it grants exposure to many aspects of the financial services industry in a relatively short time frame. Also, it provides an opportunity to contribute to the regulatory-policy-making process directly.

Governance Bodies of India

Role of SEBI:

Subject to the provision of SEBI Act 1992 entrusted objectives of SEBI are:

1) It shall be the duty of the Board to protect the interests of investors in securities and to promote the development of, and to regulate the securities market, by such measures as it thinks fit.

(2) Without prejudice to the generality of the foregoing provisions, the measures referred to therein may provide for regulating the business in stock exchanges and any other securities markets.

SEBI proactively issues Rules, regulations, circulars/ Guidelines to various Exchanges relating to regulation of the market, which the Compliance officer has to look into.

Major Role of SEBI:

• Development of Capital Markets in India
• Investor protection
• Regulates trading on Stock Exchanges
• Regulates all SEBI registered entities i.e. intermediaries namely Depositories, Brokers, Custodians, Mutual Funds, Clearing Corporations etc.

Reporting of SEBI:

SEBI is accountable to the Parliament of India and reporting to Ministry of Finance.  As per the jurisdiction of SEBI and the Stock Exchange, various laws which are applicable are:

• Securities Contracts (Regulation) Act, 1956
• Companies Act, 2013
• Securities and Exchange Board of India Act, 1992
• Depositories Act, 1996
• Prevention of Money Laundering Act, 2002
• Appellate mechanisms through Securities Appellate Tribunal/Courts
• Stock Exchange exercises powers under Equity Listing Agreement which prescribes continuous listing requirements and obligations  

Market Size:  Share in Traded Value in Secondary Market (Per Cent) – 2018-19:

The derivatives market is ranked on the basis of number of contracts not on the basis of value. The share of different derivative products as compared to the market in India Secondary market is:

• Equity Derivatives constitutes 86.7 %
• Currency Derivatives constitutes 5.8 %
• Equity Cash 3.2%
• Commodity Derivatives 2.7%
• Corporate Bonds 1.5% and
• Interest Rate Derivatives 0.1%

In International derivative Market, Interest Rate Derivatives are most widely traded but in India this market is yet to grow.

Risk and Compliance Officer’s Role in Industry:

• Opportunities to work with the Regulator – Will be exposed to various departments in SEBI like Mutual funds and surveillance department, commodities department etc.
• Opportunity with Market Infrastructure Institutions Depositories, clearing, intermediaries, commodity market, currency market, equity cash market, merchant bankers,
• Opportunities with Intermediaries in Compliance department

Hiring the right people:

SEBI conducts examination every year (since last 2 years exams) for the post of Compliance Officer 

• NISM Series-III-A: Securities Intermediaries Compliance (Non- Fund) Certification Examination Opportunities for approximately more than 100 officers in a year. The examination is conducted every year. Minimum qualification is Graduation. Further strengthen at state levels to be closer to stakeholders
• NISM Series-III-B: Issuers Compliance Certification Examination.

The examination is divided into three levels

• Level 1 Aptitude Test
• Level 2 – Descriptive testing the Subject Knowledge  and Market Knowledge
• Interview – Conducted at all metros but the selection panel remains the same.

After clearance of the process the career framework in SEBI is:

Career Framework:  

An incumbent joins at the Entry level of Officer Grade and is involved in 1 month Training.  For familiarization of departments, the incumbents are rotated across departments.  They are taught core objectives of the SEBI defending.

Vertical movement to the Managerial cadre can be done after 3 years.  Cross-pollination opportunities giving exposure to various departments exist as well.

The role will be to conduct various committee meetings, interaction with corporates etc.

There’s an opportunity to be trained in Japan for 18 months, which will be sponsored by World Bank.  Opportunities are exciting to help sharpen the capabilities of an individual, basis interest and skills demonstrated.

Compensation:

Compensation is very competitive and is as per the industry standards.  The starting compensation is in the range of Rs. 15L plus.  The increment is linked to various socio-economic factors. 

The perquisites are highly significant and are good in the financial industry.  As an organization SEBI has very employee friendly policies which takes good care of them. 

Requisites Skills to work:

Should be able to work in a high pressured and fast paced environment.   Demonstrate good decision making, recommendations and upgrade knowledge as per the changing economic conditions.

Internship Program by SEBI:

The role of an Intern gets published on the SEBI’s website.  Any incumbent fulfilling the educational need can apply for Short term and Long term Internship program. 

Long term internship program runs for one year and is entitled for accommodation & scholarship.  The incumbent gets exposed to all the departments; e.g. Legal, Analytics, Research, IT (AI, Analytics etc) etc. 

Responsibilities of Compliance Officer:

Major objective is to protect the Integrity of the Institution and maintain objective approach to fulfil the fiduciary duty.

As per PIT Regulations – “The Compliance Officer shall report to the board of directors and in particular, shall provide reports to the Chairman of the Audit Committee, if any, or to the Chairman of the board of directors at such frequency as may be stipulated by the board of directors (but not less than once in a year).”

As per ICDR Regulations – “The Issuer shall appoint Compliance Officer who shall be responsible for monitoring the compliance of the securities laws and for redressal of investor grievances.”

As per MF Regulations – “1. All transactions done by the trustees or the employees or directors of the asset management company or the trustee company in the investee companies shall be disclosed by them to the Compliance Officer within one month of the transactions.   2. The Compliance Officer shall make a report thereon from the view point of possible conflict of interest and shall submit it to the trustees with his recommendations, if any.”

Way Forward

In the current complex financial scenario, the level of risk and compliance is becoming stringent. The role of SEBI in curbing the traits has got vital significance and hence the role of Compliance officer for risk management and compliances is pivotal. This role is highly in demand within the financial domain and has high growth opportunities. CFA program provides an exposure to the financial markets and gives an immense knowledge.