New Delhi: Markets regulator SEBI on Wednesday proposed changes to the eligibility criteria for directors on governing boards of market infrastructure institutions (MIIs), along with standard qualification and experience norms for key officials such as chief technology officers and chief information security officers.
In its consultation paper, the regulator said the proposals are aimed at strengthening the governance of MIIs, which include stock exchanges, clearing corporations, and depositories.
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Sebi said MIIs faced practical difficulties finding suitable candidates, especially for public interest director positions, due to existing restrictions.
These rules often disqualify expert candidates from joining an MII board if they are directors at any company even remotely linked to a stockbroker or trading member.
Under the proposed changes, Sebi said the existing exemption available to directors of public sector banks and financial institutions would be extended to directors of companies with well-diversified shareholding, even if their associates include trading members, clearing members or depository participants.
Also, Sebi has proposed defining "well-diversified shareholding" as a company where no shareholder, other than public-sector shareholders, individually or together with persons acting in concert, directly or indirectly owns 10 per cent or more of the stake or voting rights.
The regulator said the change would help facilitate the flow of expertise and talent into MIIs while maintaining safeguards against conflicts of interest. The proposals were discussed by Sebi's Secondary Market Advisory Committee (SMAC) in April this year.
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Also, SEBI has suggested that MIIs formulate a Standard Operating Procedure (SOP) detailing the required qualifications, experience, skill sets and certifications for four critical roles -- Chief Technology Officer (CTO), Chief Information Security Officer (CISO), Compliance Officer (CO) and Chief Risk Officer (CRiO).
The regulator noted that MIIs rely heavily on technology and security. However, there are currently no uniform standards for the qualifications and experience required for the people in charge of these areas.
The SOP would be approved by the governing board of the MII, taking into account inputs from relevant statutory committees.
For CTOs and CISOs, inputs would be taken from the Standing Committee on Technology, while the Regulatory Oversight Committee would provide inputs for the compliance officer and the Risk Management Committee for the chief risk officer.
The regulator said these officials play a crucial role in ensuring technological resilience, cyber security, compliance and risk management at MIIs, which function as public infrastructure utilities and first-line regulators for the capital markets.
Sebi has also proposed that vacancies in these key positions be filled within three months of becoming vacant. MIIs would be required to plan in advance where a vacancy is anticipated to avoid any gap in these critical functions.
The regulator has also sought public views on whether MIIs should appoint deputies for these key positions to ensure continuity.
The Securities and Exchange Board of India (Sebi) has sought public comments on the proposals until September 30.
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