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The Securities and Exchange Board of India (SEBI) has proposed introducing the role of Executive Directors (EDs) at market infrastructure institutions, such as stock exchanges, clearing corporations, and depositories, to enhance governance and oversight. Here are the key aspects of the proposal:

Objectives:

  1. Improved governance: SEBI aims to strengthen the governance framework at market infrastructure institutions, ensuring they operate with transparency, accountability, and integrity.
  2. Enhanced oversight: The introduction of EDs will enable more effective monitoring and supervision of these institutions, reducing the risk of regulatory breaches and improving overall market stability.

Key proposals:

  1. Appointment of EDs: SEBI proposes that market infrastructure institutions appoint EDs, who will be responsible for overseeing the daily operations and ensuring compliance with regulatory requirements.
  2. Role and responsibilities: EDs will be accountable for:
    • Implementing SEBI’s directives and regulations.
    • Ensuring the institution’s operations are aligned with its objectives and policies.
    • Maintaining the integrity of the market infrastructure.
    • Reporting to the board of directors and SEBI on key matters.
  3. Eligibility criteria: EDs will need to meet specific eligibility criteria, including:
    • Relevant experience in the financial sector or a related field.
    • Strong understanding of regulatory requirements and market infrastructure operations.
    • Integrity and reputation.
  4. Term and tenure: EDs will have a fixed term, with a maximum tenure of 5 years, subject to review and renewal.
  5. Independence: EDs will be required to maintain their independence and impartiality, avoiding any conflicts of interest.

Benefits:

  1. Enhanced regulatory compliance: EDs will ensure that market infrastructure institutions adhere to regulatory requirements, reducing the risk of non-compliance.
  2. Improved risk management: EDs will help identify and mitigate risks, ensuring the stability and integrity of the market infrastructure.
  3. Better governance: The introduction of EDs will lead to more effective decision-making, improved transparency, and enhanced accountability.

Next steps:

SEBI has invited public comments on the proposal, which will be considered before finalizing the regulatory framework. Once implemented, the new governance structure is expected to enhance the overall efficiency and effectiveness of market infrastructure institutions in India.

Business
Updated:
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<p>The Securities and Exchange Board of India (SEBI) has proposed introducing the role of Executive Directors (EDs) at market infrastructure institutions, such as stock exchanges, clearing corporations, and depositories, to enhance governance and oversight. Here are the key aspects of the proposal:</p> <p><strong>Objectives:</strong></p> <ol> <li><strong>Improved governance</strong>: SEBI aims to strengthen the governance framework at market infrastructure institutions, ensuring they operate with transparency, accountability, and integrity.</li> <li><strong>Enhanced oversight</strong>: The introduction of EDs will enable more effective monitoring and supervision of these institutions, reducing the risk of regulatory breaches and improving overall market stability.</li> </ol> <p><strong>Key proposals:</strong></p> <ol> <li><strong>Appointment of EDs</strong>: SEBI proposes that market infrastructure institutions appoint EDs, who will be responsible for overseeing the daily operations and ensuring compliance with regulatory requirements.</li> <li><strong>Role and responsibilities</strong>: EDs will be accountable for: <ul> <li>Implementing SEBI's directives and regulations.</li> <li>Ensuring the institution's operations are aligned with its objectives and policies.</li> <li>Maintaining the integrity of the market infrastructure.</li> <li>Reporting to the board of directors and SEBI on key matters.</li> </ul></li> <li><strong>Eligibility criteria</strong>: EDs will need to meet specific eligibility criteria, including: <ul> <li>Relevant experience in the financial sector or a related field.</li> <li>Strong understanding of regulatory requirements and market infrastructure operations.</li> <li>Integrity and reputation.</li> </ul></li> <li><strong>Term and tenure</strong>: EDs will have a fixed term, with a maximum tenure of 5 years, subject to review and renewal.</li> <li><strong>Independence</strong>: EDs will be required to maintain their independence and impartiality, avoiding any conflicts of interest.</li> </ol> <p><strong>Benefits:</strong></p> <ol> <li><strong>Enhanced regulatory compliance</strong>: EDs will ensure that market infrastructure institutions adhere to regulatory requirements, reducing the risk of non-compliance.</li> <li><strong>Improved risk management</strong>: EDs will help identify and mitigate risks, ensuring the stability and integrity of the market infrastructure.</li> <li><strong>Better governance</strong>: The introduction of EDs will lead to more effective decision-making, improved transparency, and enhanced accountability.</li> </ol> <p><strong>Next steps:</strong></p> <p>SEBI has invited public comments on the proposal, which will be considered before finalizing the regulatory framework. Once implemented, the new governance structure is expected to enhance the overall efficiency and effectiveness of market infrastructure institutions in India.</p>
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SEBI Proposes Overhaul of Governance Framework for Market Infrastructure Institutions

SEBI has proposed a significant overhaul of the governance framework for market infrastructure institutions, including stock exchanges, by mandating the appointment of two executive directors to bolster operational oversight. The move aims to ensure that these institutions prioritize public interest, compliance, and systemic stability above commercial considerations. The proposed changes also include strengthening the roles of other key managerial personnel and limiting the external directorships of MDs and EDs.

The Securities and Exchange Board of India (SEBI) has announced a proposal to revamp the governance framework of market infrastructure institutions (MIIs), including stock exchanges. This move comes as MIIs have witnessed a sharp growth in investor base, revenue, and market activity, prompting concerns about the potential for governance failures. The proposed changes aim to address these concerns by introducing two executive directors (EDs) to head critical operations and regulatory, compliance, risk management, and investor grievances. These EDs will be designated as key managerial personnel (KMPs) and will report to the board and SEBI on issues in their respective verticals. The proposal also includes strengthening the roles of other KMPs, such as the Chief Technology Officer, Chief Information Security Officer, Chief Risk Officer, and Compliance Officer, to ensure robust internal systems.

Governance Framework Overhaul

The proposed overhaul of the governance framework for MIIs is a significant step towards ensuring that these institutions prioritize public interest, compliance, and systemic stability above commercial considerations. The appointment of two EDs will provide empowered leadership to critical functions such as technology, risk management, and investor protection, thereby preventing governance failures. The EDs will be responsible for heading critical operations and regulatory, compliance, risk management, and investor grievances, respectively. They will also be inducted into the MII’s governing board alongside the Managing Director (MD).

Key Highlights of the Proposal

Some of the key highlights of the proposal include:
* The appointment of two EDs to head critical operations and regulatory, compliance, risk management, and investor grievances
* The EDs will be designated as KMPs and will report to the board and SEBI on issues in their respective verticals
* Strengthening the roles of other KMPs, such as the Chief Technology Officer, Chief Information Security Officer, Chief Risk Officer, and Compliance Officer
* Limiting the external directorships of MDs and EDs to prevent conflicts of interest
* The MD may serve as a non-executive director only on the board of a Section 8 company or an unlisted government entity not engaged in commercial activity
* The executive directors will be barred from directorships in any company except MII subsidiaries

Rationale Behind the Proposal

Expected Impact of the ProposalData and Statistics

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