Securities and Exchange Board of India (SEBI) has introduced several updates, including regulatory forbearance and extended compliance deadlines, particularly with regard to the implementation of the Centralized Securities Compliance and Reporting Framework (CSCRF). These changes are designed to ease the compliance burden on market participants while ensuring that the implementation of the new framework proceeds smoothly.
What is Regulatory Forbearance?
Regulatory forbearance refers to a temporary relaxation of certain compliance requirements or regulations. SEBI has decided to provide regulatory forbearance to regulated entities (REs) concerning the CSCRF compliance until March 31, 2025. During this period, if any non-compliance related to the CSCRF comes to SEBI’s notice, the regulator will not take immediate action, provided that the REs can demonstrate that they have made meaningful progress towards implementing the framework.
This is a significant relief for market participants, as it provides them with a buffer period to ensure proper implementation of the CSCRF without the immediate threat of regulatory action. However, SEBI has made it clear that REs must take concrete steps toward compliance and show genuine progress before they can benefit from this forbearance.
The forbearance period, lasting until March 31, 2025, offers REs the opportunity to align their operations with the new CSCRF requirements. This regulatory flexibility is aimed at facilitating a smoother transition and reducing the risks of penalties for non-compliance during the initial phase of implementation.
Opportunity for Demonstrating Progress
SEBI has provided a unique opportunity for REs to present their progress in the implementation of the CSCRF. If non-compliance is flagged, SEBI will give the REs an opportunity to demonstrate the meaningful steps they have taken in working towards full compliance. Only after this opportunity is exhausted will any regulatory action be considered. This approach fosters a collaborative relationship between the regulator and the market participants, ensuring that the primary goal—enhancing market transparency and compliance—is met without unnecessary disruption.
Extension of Compliance Dates for Certain Regulated Entities
SEBI has also decided to extend the compliance timelines for certain regulated entities. This extension is in response to feedback received regarding the rationalization of categorization of these entities. The following categories of REs now have a later deadline to comply with CSCRF requirements:
This extension allows these entities additional time to make the necessary adjustments to their systems and processes in order to meet the updated requirements.
Data Localisation and Security Standards
One of the key areas of regulatory change involves data security and localisation standards, particularly for entities handling sensitive financial data. Based on feedback received, SEBI has decided to keep the provisions related to Data Localisation (specifically the Data Security standard PR.DS.S2) in abeyance until further notice. This pause suggests that SEBI is considering additional consultations to address concerns and ensure that the final provisions strike the right balance between security and operational flexibility for market participants.
Conclusion
SEBI’s decision to offer regulatory forbearance until March 31, 2025, and extend compliance timelines for certain entities demonstrates a flexible and supportive approach to the introduction of the CSCRF. This allows regulated entities to make meaningful progress toward compliance without facing the immediate consequences of non-compliance. With the added provision for further consultations on data localisation, SEBI is ensuring that the regulatory framework evolves in response to industry feedback. These measures should provide market participants with the time and space they need to align their operations with the new regulations, fostering a smoother and more effective transition into 2025.
