Easing penal actions for technical glitches, Sebi on Friday said financial penalties will be imposed solely on the market infrastructure institutions (MIIs), rather than their Managing Directors (MDs) or Chief Technology Officers (CTOs).

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Moreover, MIIs -- stock exchanges, clearing corporations and depositories -- will also be granted the opportunity to explain the cause of any technical glitches before penalties are enforced, Sebi said in its circular.

Earlier, MIIs and their MDs and CTOs faced automatic financial penalties or financial disincentives for technical glitches if certain criteria weren't met.

The new framework came after Sebi received recommendations to review imposition of financial disincentives on individuals from various committees and MIIs in a bid to promote ease of doing business for such market infrastructure institutions.

Sebi noted that operations of MIIs are increasingly becoming system-driven, with them operating constellation of IT systems (both software and hardware) having dependency on various vendors or service providers.

"Further, the test for ascertaining any individual responsibility for a technical glitch would entail ascertaining if there has been any act of omission/commission, including if an MD/CTO did or did not ensure adequate oversight/resources/checks and balances to prevent such glitch reasonably and by definition such a test would require application of mind and assessment," Sebi added.

In its circular, the regulator said, "It has been decided to restrict imposition of existing financial disincentives to MIIs only".

Also, MIIs are required to submit a report within 90 days of any disruption, detailing the financial penalties paid. Also, they are required to disclose this information on their websites, annual reports and to investors if listed.

MIIs must investigate technical glitches to determine if any individual is responsible, and take appropriate actions. Further, Sebi reserves the right to take further action against individuals if necessary.

The new framework is to come into effect immediately.