Informist, Tuesday, Sep 24, 2024

--SEBI issues circular on evaluating market infrastructure entities

--SEBI:Mkt infra entities' tech resilience to weigh 40% in evaluation

MUMBAI – The Securities and Exchange Board of India today issued a circular detailing the minimum criteria for independent evaluation of the performance of market infrastructure institutions. The circular follows the approval given by the regulator's board at its meeting on Jun 27 for a broad framework for such evaluation.

SEBI currently counts all stock exchanges, clearing corporations, and depositories in the list of market infrastructure institutions. Under the current rules, these institutions have to appoint independent external agencies to evaluate their performance. But there was no uniformity in the evaluations, SEBI said in the circular.

The market regulator has now assigned specific weights to different areas of operation of these institutions to help independent external agencies evaluate their performance. The largest weight of 40% is given to resilience in technology and processes for delivering the core functions of the entity under evaluation. The next largest weight of 17% is given to investor education and protection, according to the circular.

Further, SEBI has assigned a weight of 15% to efficient discharge of regulatory role by the market infrastructure entity, 10% for compliance with regulatory norms, 8% for governance practices, and 5?ch for resource adequacy and for fair treatment of stakeholders and information disclosure.

Following the evaluation, the market infrastructure institution will be rated by the independent external agency. The SEBI circular specifies the details of a new rating framework that the agency has to follow to arrive at a judgement on the performance of the institution concerned.

SEBI said the first independent external evaluation for a market infrastructure institution will be for 2024-25 (Apr-Mar), and the report should be submitted to the board of directors of the institution and to SEBI by Sep 30, 2025. The second evaluation will be for a block of three years from 2025-26 to 2027-28, and the report for this will have to be submitted by Sep 30, 2028. Thereafter, the evaluations will be carried out for blocks of three financial years.

SEBI further said in its circular that even the managing directors and key management personnel of market infrastructure institutions would have to be evaluated for their efforts towards achieving desired outcomes in critical operations, discharge of regulatory roles, compliance, risk management, and redressing investor grievances.

The market regulator said the provisions of the circular will come into effect from Oct 24. End

Reported by Rajesh Gajra

Edited by Rajeev Pai

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