Sebi Proposes New Rules on Who Can Serve on Stock Exchange Boards

The Securities and Exchange Board of India (Sebi) has proposed changes to eligibility rules for directors on the boards of stock exchanges and other key market infrastructure institutions, including clearing corporations and depositories.

The regulator said the existing restrictions can sometimes make it difficult for these institutions to identify suitable and experienced professionals for board positions. Under the current framework, individuals associated with stock brokers and other market intermediaries are generally barred from serving on the boards of market infrastructure institutions.

Sebi has now proposed allowing directors of widely held companies to join the boards of these institutions even when another company belonging to the same corporate group is a stock broker, clearing member or depository participant.

Under the proposed framework, a company would be considered widely held when no private shareholder, either individually or along with related parties, owns or controls 10 per cent or more of the company. Public-sector shareholders would be excluded while calculating this threshold.

According to Sebi, relaxing the restriction could significantly expand the pool of eligible candidates and allow stock exchanges and other market institutions to bring more experienced professionals into their governance structures.

The regulator has also proposed clearer qualification and experience criteria for senior executives responsible for critical functions such as technology, cybersecurity, compliance and risk management.

Sebi has suggested that vacancies in these important positions should be filled within three months. The regulator is also seeking stakeholder views on whether market infrastructure institutions should be permitted to appoint deputies for such roles.

The proposed deputy system could help maintain continuity when a senior official leaves the organisation or becomes temporarily unavailable, particularly in areas where disruptions could affect the functioning and security of market infrastructure.

Sebi has invited stakeholders and other interested parties to submit comments on the proposed changes. The deadline for submitting feedback is September 30.

The proposed amendments are intended to make governance requirements for market infrastructure institutions more flexible while maintaining access to experienced professionals for crucial board and senior management responsibilities.