SEBI proposes revamp of MIIs to boost governance

Securities and Exchange Board of India (SEBI) proposed measures to strengthen the governance of market infrastructure institutions (MII)  in a consultation paper released on June 24.

The need for review comes in the backdrop of expanding scope of the securities market and the adverse effects slippages in governance in these institutions could have on the broader economy, SEBI officials wrote in the paper.

The markets watchdog proposed MIIs, like stock exchanges or clearing corporations, appoint two executive directors reporting to the Managing Director. SEBI had already proposed three broad verticals in MIIs – ‘Critical Operations,’ ‘Regulatory, Compliance, Risk Management and Investor Grievances’ and ‘Commercial Interests and Business Development.’

SEBI now said that the first two should be a priority in governance “to ensure the orderly functioning and development of the securities market.” 

The two EDs will head the first two verticals, SEBI proposed. Appointment of an ED for the third vertical has been left to the discretion of the MIIs, it added. Under the current regulations, only the MDs of MIIs are allowed to be on the Governing Boards. SEBI has now proposed that the Executive Directors of the two verticals also be part of the board and are in comparable stature with the MD.  This means that the appointment and re-appointment of EDs will be similar to that of the MD, which may need SEBI’s regulatory approval. EDs are required to report to the Governing Board and SEBI quarterly on matters concerning their respective verticals, SEBI said in its consultation paper. 

The regulator proposed that MDs of the MIIs can now take non-executive directorships in an unlisted government company, either central or State, or in a non-profit company. EDs however will not hold directorships in companies other than the MII’s subsidiary, SEBI proposed. The proposals will be open for public consultations until July 15.