SEBI has recently announced the implementation of the Legal Entity Identifier (LEI) system for issuers who have listed or are going to list non-convertible securities, securitized debt instruments, and security receipts. The LEI system is a unique global identifier for legal entities involved in financial transactions that seek to create a global reference data system that uniquely identifies every legal entity that is a party to a financial transaction.
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- SEBI has introduced the LEI system, a unique global identifier for legal entities participating in financial transactions.
- Issuers proposing to list or having outstanding municipal debt securities will have their requirement for LEI specified later by SEBI.
- The RBI mandates non-individual borrowers with an aggregate exposure of over Rs 25 crore to obtain the LEI code.
- Issuers having outstanding listed non-convertible securities, securitized debt instruments, and security receipts must obtain and report their LEI code to the centralized database of corporate bonds and depositories by September 1.
- Legal Entity Identifier India Ltd, a subsidiary of the Clearing Corporation of India Ltd, is authorized to issue and manage LEI codes in India.
- The depositories are responsible for mapping the LEI code provided by the issuers with the ISIN at the time of activation of the ISIN for future issuances, with a deadline of September 30.
- The LEI system will ensure greater transparency and better risk management in the financial markets.
- The LEI system will also prevent fraud and financial crimes by properly identifying and verifying legal entities participating in financial transactions.
What is Legal Entity Identifier (LEI)?
- To identify legally distinct entities that engage in financial transactions, a 20-character code called LEI code is used.
- It is intended to serve as a unique global identifier for legal entities involved in financial transactions.
- The LEI system is instrumental in enhancing transparency in financial markets and lowering systemic risk by establishing a complete and standardized database of legal entity information.
- SEBI stands for Securities and Exchange Board of India. It is the regulator of the securities market in India.
- It was established in 1988 and was given statutory powers on April 12, 1992, under the Securities and Exchange Board of India (SEBI) Act, 1992.
- The act was passed by the Parliament of India to regulate the securities market and protect the interests of investors in securities and promote the development of the securities market.
- It is owned by the Ministry of Finance, Government of India, but functions as an autonomous body with its own governing board.
- The SEBI has a three-tiered structure consisting of a chairman, six whole-time members, and five part-time members appointed by the central government.
- Current SEBI Chairman – Madhabi Puri Buch (Since February 2022)
- She is the first woman chairperson of the SEBI.
Functions and Powers of SEBI
- Regulates the securities market in India and ensures the protection of investors’ interests.
- Regulates and monitors the working of stockbrokers, sub-brokers, portfolio managers, and other market intermediaries.
- Conducts inspections, audits, and investigations of companies and market intermediaries to detect fraudulent and unfair trade practices.
- Regulates the issuance and trading of securities such as shares, debentures, bonds, and mutual funds.
- Develops guidelines and rules for the functioning of stock exchanges and other market intermediaries.
- Promotes investor education and awareness through seminars, workshops, and other programs.
- Has the power to impose penalties and take legal action against companies and market intermediaries for violating securities laws and regulations.
- Collaborates with other regulators and organizations in India and abroad to promote the development of the securities market.
SEBI plays a crucial role in maintaining the integrity and transparency of the securities market in India, and its actions and regulations have a significant impact on the Indian economy.
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