SEBI Proposes Revamp of MIIs to Boost Governance

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