Sebi Governance Framework for MIIs

The Securities and Exchange Board of India (SEBI), the country’s capital market regulator, released a consultation paper on Monday, proposing measures to enhance the governance of market infrastructure institutions (MIIs) such as stock exchanges, clearing corporations and depositories. This consultation framework aims to regulate the functioning of entities such as the NSE, BSE and Central Depository Services Ltd (CDSL).

As part of the proposed reforms, SEBI has suggested appointing two Executive Directors (EDs) to manage key areas of operations and regulatory oversight.

Specifically, the proposal mandates the appointment of two EDs who will be designated as Key Managerial Personnel (KMPs) and will serve on the MII’s Governing Board. One ED will lead “Critical Operations,” while the other will be responsible for “Regulatory, Compliance, Risk Management, and Investor Grievances.”

SEBI emphasised that the rapid expansion of the securities market — reflected in higher market capitalization, trading volumes, technological growth, and a larger investor base — has significantly increased the responsibilities of MIIs as primary regulators. Therefore, strong governance is essential, as any failure in these institutions could negatively impact the financial markets and the broader economy.

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Among the key recommendations is the requirement that Public Interest Directors (PIDs) chair major board committees. SEBI also proposed that all important board committees undergo an independent evaluation every three years to ensure their effectiveness and compliance.

The consultation paper also recommends redefining the roles and responsibilities of the Managing Director (MD), Executive Directors (EDs), and other specific Key Managerial Personnel, such as the Chief Operating Officer (COO), Chief Risk Officer (CRiO), Chief Technology Officer (CTO), and Chief Information Security Officer (CISO).

The regulator noted that these proposals are intended to ensure that MIIs prioritise public interest, technological robustness and regulatory compliance above purely commercial objectives.