SEBI regulated entities would be closely familiar with SEBI’s SDD guidelines, and the importance accorded to compliance with these entities.
However, compliance can be quite challenging, especially if you don’t have the right Structured Digital Database (SDD) solution.
In this comprehensive guide, we explore the importance of compliance with SEBI’s SDD guidelines, common hurdles faced by businesses, and a step-by-step guide to overcoming those hurdles.
Introduction to SEBI’s SDD Guidelines
SEBI’s SDD guidelines were introduced in 2018 to promote transparency and accountability in the securities market. The guidelines require market intermediaries and participants to maintain a structured digital database (SDD) recording the flow of UPSI with multiple details of each across the sender, sender’s entity, receiver, the receivers entity and other details in relation to the UPSI itself (of course, actual details of the UPSI must never be inserted).
Understanding the Importance of Compliance with SDD Guidelines
Compliance with SEBI’s SDD guidelines is not only mandatory but also crucial for businesses in the securities market. Non-compliance can result in penalties and legal action, which can significantly affect the reputation and financial stability of the business.
Common Hurdles Faced by Businesses in Complying with SDD Guidelines
The most common hurdle faced by businesses in complying with SEBI’s SDD guidelines is the lack of a good structured digital database solution.
Many businesses used to rely on manual record-keeping using, say, Excel. While time-consuming and error-prone, the most critical aspect is that such tamperable media is not permissible.
Moreover, the SDD must be internal, controlled, maintain detailed time-stamping and integrating the SDD with existing systems can be challenging, and ensuring data security and privacy can be complex.
A Step-by-Step Guide to Overcoming Compliance Hurdles
The following step-by-step guide can help businesses overcome compliance hurdles and ensure seamless compliance with SEBI’s SDD guidelines.
Step 1: Identify the UPSI Data to be incorporated in the SDD
The first step is to identify what information constitutes Unpublished Price Sensitive information or UPSI.
Step 2: Identify the originators, holders, senders and receivers of the UPSI
The next step is to identify what activities Unpublished Price Sensitive information, who are involved as part of those activities, the originators or aggregators of the UPSI, the communicators or senders of that UPSI and the recipients or reviewers of tall such UPSI.
Step 3: Identify the right Structured Digital Database (SDD) solution
Implementing a structured digital database (SDD) starts with identifying the right solution.
Aspects to Consider:
Design of the SDD;
Natural flow and ease of use;
Learning curve support;
Future-proofing of design and structure;
Connectivity with HRMS systems;
Support for Role-based access;
In-built privacy and information barriers controls;
Availability of updates based on regulatory changes;
Deploy-ability on Internal servers;
Deploy-ability over multiple modes and types of infrastructures,
Whether there are any attendant/ hidden infrastructure costs
Access over mobile interfaces;
Ready instruction manuals,
Exportability of data/ back-up,
Ability to migrate data in and/ or migrate data out.
As you can see, a lot goes into getting the right solution. The costs (in terms of money and effort) for the wrong solution can be heavy and may lead to non-compliance and penal actions as well. It is, therefore, critical that the right system solution is deployed, like Affinis, the best and only fully certified Structured Digital Database solution.
Step 4: Train Employees on recording flow of UPSI in SDD
Sensitize people about the criticality of the regulatory requirement around the Structured Digital Database and on its usage and maintenance. This includes how to capture the flow of UPSI, approve requests made in this regard, details to be included in each entry, the manner in which the Nature of UPSI must be described, timelines for update into the SDD, describing the correct medium of communication, general access levels and privacy protocols. Regular training and monitoring can help ensure that the SDD is used correctly and that compliance is maintained.
SEBI’s Penalties for Non-Compliance with SDD Guidelines
Non-compliance with SEBI’s SDD guidelines can result in severe penalties, including fines, suspension of trading activities, and legal action. The severity of the penalty depends on the nature and extent of the violation. It is essential to ensure that compliance is maintained at all times to avoid such penalties.
SEBI’s Support for Businesses in Complying with SDD Guidelines
SEBI provides various resources and support for businesses in complying with its SDD guidelines. This includes guidelines, FAQs, and online resources. Moreover, SEBI conducts regular inspections and audits to ensure compliance and provides guidance and assistance to businesses that require it.
Compliance with SEBI’s SDD guidelines is crucial for businesses in the securities market. However, compliance can be challenging, especially if you don’t have a structured digital database (SDD) in place. By following the step-by-step guide outlined in this comprehensive guide, businesses can overcome compliance hurdles and ensure seamless compliance with SEBI’s guidelines. Remember, compliance is not only mandatory but also crucial for tracking your own internal risks and enhancing market trust.
For a Structured Digital Database solution that meets all these criteria and more, reach out to us for a live demo (or to register for a virtual one).