Prelims: Indian economy| Current events of national and international importance
Why in news?
Recently, Securities and Exchange Board of India (SEBI) proposed measures to strengthen the governance of market infrastructure institutions (MII) in a consultation paper.
- MIIs – Market Infrastructure Institutions (MIIs) form the backbone of India's securities market and it include critical market entities like,
- Stock Exchanges
- Clearing Corporations
- Depositories
Reason for revamp
- Expanding scope of India's securities market.
- Past slippages in governance of MIIs raised concerns.
- Need to strengthen oversight and ensure smooth, transparent functioning.
- Prevent adverse impacts on the broader economy.
Key SEBI Proposals:
- Mandatory appointment of 2 Executive Directors (EDs) – Where ED 1 is the Head of Critical Operations and ED 2 will be the Head of Regulatory, Compliance, Risk Management & Investor Grievances
- Optional ED for commercial interests vertical – Third vertical on Business Development — appointment of ED left to MIIs' discretion
- Inclusion of EDs in governing board – EDs for the two critical verticals will be part of the MII Governing Board
- Their appointment, re-appointment will follow processes similar to MD, including possible SEBI approval
- Reporting obligations – EDs must report quarterly to the Governing Board and SEBI on their respective areas
- Restrictions on directorships – MDs can take non-executive directorships in Unlisted government companies (Central/State)
Non-profit companies
- EDs cannot hold directorships outside the MII's subsidiaries.
Significance
- It enhances transparency and accountability in MIIs.
- It clearly segregates critical and commercial functions.
- It ensures stronger oversight of operations and investor protection.
- It aims to bolster confidence in India's financial markets.
Reference
The Hindu| SEBI proposes revamp of MIIs to boost governance
