The Securities and Exchange Board of India has unveiled comprehensive governance reforms targeting stock exchanges, clearing corporations, and depositories. These proposed measures aim to strengthen oversight and accountability as market infrastructure institutions experience unprecedented growth in investor participation and profitability. The reforms prioritize public interest over commercial objectives, marking a significant shift in regulatory approach.
Sebi proposes mandatory appointment of two executive directors on market infrastructure institution boards to oversee critical functions, including trading, clearing, settlement, and risk management. These executive directors will hold key management personnel status, comparable to managing directors, ensuring dedicated oversight of essential operations.
A third executive director may be appointed for business development purposes. This structural change addresses the growing complexity of market operations and ensures specialized leadership for crucial regulatory functions, enhancing accountability across all operational areas.
The consultation paper seeks to codify specific roles and responsibilities for managing directors, executive directors, chief technology officers, and chief information security officers. Currently, these responsibilities remain either distributed across departments or informally defined within regulatory frameworks.
A clear role definition aims to eliminate ambiguity in accountability structures and ensure proper oversight of technological and security functions. This formal codification will establish transparent reporting structures and performance metrics, enabling better regulatory monitoring and institutional governance across all market infrastructure organizations.
New restrictions limit managing directors to serving only as non-executive directors in charitable entities or unlisted government companies without commercial activities. Executive directors can only join the boards of market infrastructure institution subsidiaries.
These measures mirror banking sector regulations and aim to reduce potential conflicts of interest. While experts support the accountability enhancement, some raise concerns about reduced availability of qualified independent directors for listed companies, potentially impacting broader corporate governance standards.
These governance reforms arrive as Sebi reviews the National Stock Exchange's delayed IPO application, emphasizing public interest primacy over commercial considerations. The proposals reflect a regulatory response to rapid market growth and increased retail investor participation.
Public comments remain open until July 15, with implementation expected to reshape market infrastructure governance fundamentally, ensuring stronger investor protection and institutional accountability.