SEBI Revamps Oversight Framework For Stock Exchanges And Market Infrastructure Institutions

The updated SEBI guidelines, issued in a circular on Tuesday, aim to enhance governance by clearly defining the structure and responsibilities of various statutory committees

The Securities and Exchange Board of India (SEBI) has announced significant revisions to its oversight framework for stock exchanges and other market infrastructure institutions (MIIs). The updated guidelines, issued in a circular on Tuesday, aim to enhance governance by clearly defining the structure and responsibilities of various statutory committees.

The changes follow recommendations from SEBI's Committee on Strengthening Governance of MIIs. According to the circular, statutory committees within MIIs will now be categorised into functional, oversight, and investment committees.

The key committees under this framework include the Member Committee, Nomination and Remuneration Committee, Oversight Committees, Standing Committee on Technology, Regulatory Oversight Committee, Risk Management Committee, and Investment Committee.

SEBI has outlined specific requirements for the composition of these panels. Each committee should include Key Management Personnel (KMP), Non-Independent Directors (NIDs), Independent External Professionals (IEPs), and Public Interest Directors (PIDs). Crucially, every committee must be chaired by a PID with relevant expertise, and PIDs must constitute at least half of the committee members.

For resolutions to be valid, SEBI mandates that the number of PIDs voting must be at least equal to or greater than the total number of other members voting. "The voting on a resolution in the meetings of the statutory committees at MIIs shall be valid only when the number of PIDs that have cast their vote on such resolution is not less than the total number of other members put together, who have cast their vote on such resolution," SEBI said.

Additionally, SEBI has delineated specific responsibilities and terms of reference for each committee. The functions or terms of reference of statutory committees cannot be delegated, except for certain operational activities of the Member Committee.

Regarding compliance, MIIs are required to establish mandatory committees as specified by relevant laws. Public Interest Directors are limited to serving on a maximum of five statutory committees. Independent External Professionals must possess integrity, a sound reputation, and no conflicts of interest.

The new guidelines will take effect 30 days from the issuance of the circular, marking a significant step towards strengthening the governance framework of India's market infrastructure institutions.