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Informist, Friday, Nov. 22, 2024

MUMBAI – The Securities and Exchange Board of India Friday said market infrastructure institutions comprising stock exchanges, clearing corporations and depositories should strengthen their governance framework by ensuring they are staffed with key management personnel of appropriate stature and independence in areas such as compliance, risk, technology, and information security. These key management personnel are important for any market infrastructure institution to deliver on their core public interest mandate of giving priority to technological resilience, market integrity, and compliance over commercial governance, SEBI said in its consultation paper. 

The regulator said according to the Stock Exchanges and Clearing Corporations Regulations, 2018 and Depositories and Participants Regulations, 2018, it is mandatory for market infrastructure institutions to give high priority to critical operations and regulatory, compliance, risk management, and investor grievances over other functions including business development.

Market infrastructure institutions have a governing board that must have an equal or majority of non-executive public interest directors over other directors, the regulator said. SEBI appoints the public interest directors and managing directors of market infrastructure institutions among the candidates suggested by the governing body of the market infrastructure institutions, the regulator said.  

The regulator suggested that the managing director has overall authority and responsibility over all the three verticals--vertical 1, vertical 2, and vertical 3. Vertical 1 covers operations and technology, vertical 2 consists of regulatory, compliance, risk management, and investor grievances, and vertical 3 consists of other functions such as business development.

SEBI recommended that along with having a capable managing director, there is a need for able key management personnel of appropriate stature and ability in vertical 1 and vertical 2. These key management personnel must be able and willing to operate independent of short-term commercial considerations of vertical 3.

SEBI said it has observed that in large market infrastructure institutions, there is a significant large gap between the compensation of the managing director and key management personnel heading verticals 1 and verticals 2. SEBI wants these key management personnel to independently interact with the appropriate statutory committees of the governing board which would also in turn contribute to their annual performance appraisals.

The regulator suggested empowering the governing board of market infrastructure institutions to set a policy around a minimum cooling-off period for its key manager personnel and directors on the governing board before they can join a competing market infrastructure institute.   

The regulator proposed that market infrastructure institutions shall adopt and implement a policy approved by its governing board prescribing a minimum cooling-off period for key management personnel and their directors before joining a competing market infrastructure institution and SEBI shall no longer prescribe a cooling-off period for public interest directors. SEBI invited public comments and suggestions to be submitted latest by Dec. 12 through web-based online mode.  End

Reported by Apratim Sarkar

Edited by Akul Nishant Akhoury

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