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CS Executive · Capital Market and Securities Laws · Securities Contracts (Regulation) Act, 1956

Nirmal Clearing Corporation Ltd has taken over clearing functions from an exchange. It prepares its rules for periodical settlement and delivery of securities. Under the Securities Contracts (Regulation) Act, 1956, what must it do with these bye-laws?

A clearing corporation must make bye-laws for the transfer of clearing house duties and submit them to SEBI for approval. SEBI may approve if satisfied that the transfer serves the interest of trade and the public interest. Approval by the exchange or Registrar is not the prescribed route.

  1. APublish them directly without any approval
  2. BMake bye-laws and submit them to SEBI for approvalCorrect
  3. CFile them with the Registrar of Companies for approval
  4. DSubmit them to the stock exchange, whose approval is final

Explanation

Section 8A(2) requires every clearing corporation to make bye-laws for the transfer of clearing house functions and submit them to SEBI for approval. SEBI may approve them if satisfied it is in the interest of trade and the public interest. Approval by the exchange alone is not the statutory route.

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