SEBI Notifies Leadership and Governance Framework for Market Infrastructure Institutions (MIIs)

SEBI Notifies Leadership and Governance Framework for Market Infrastructure Institutions (MIIs)

The Securities and Exchange Board of India (SEBI) has formalised a comprehensive framework to restructure leadership, reporting lines and governance responsibilities across Market Infrastructure Institutions (MIIs), including stock exchanges, clearing corporations and depositories. The changes aim to strengthen regulatory oversight, risk management and operational resilience.

Key Objectives

• Enhance independence and accountability within MIIs
• Strengthen regulatory, risk and technology governance
• Reduce concentration of power in the Managing Director’s office
• Improve transparency in senior appointments and performance oversight

Major Structural Changes

1. Mandatory Appointment of Two Executive Directors (EDs)

MIIs must appoint:

• ED (Critical Operations): Responsible for core operational functions
• ED (Regulation, Compliance & Risk): Responsible for regulatory affairs, compliance, risk management and investor grievances

Both EDs:

• Will be full-time executives
• Will sit on the governing board of the MII
• Will report directly to the Managing Director (MD)

2. Transparent Appointment Process

• Appointments must be advertised in all editions of at least one national daily
• MIIs must forward at least two candidates per post to SEBI
• Proposed compensation packages must be disclosed upfront
• Compensation terms cannot be altered without prior board approval
• Appointment process must begin at least two months before the incumbent’s term ends

3. Oversight by Public Interest Directors (PIDs)

• PIDs will oversee annual performance assessments of both EDs
• SEBI may grant temporary exemptions to MIIs facing genuine operational challenges

Revised Reporting and Oversight Structure

Executive Reporting

• Both EDs report to the MD
• Department heads, including:
  • Chief Technology Officer (CTO)
  • Chief Information Security Officer (CISO)
  • Compliance Officer
  • Chief Risk Officer (CRO)
    will now report to their respective EDs, not directly to the MD

Independent Committee Interactions

• Standing Committee on Technology will meet the ED (Critical Operations) quarterly without the MD present
• Regulatory Oversight Committee and Risk Management Committee will meet the ED (Regulation & Risk) on similar terms
• Committees will submit independent performance assessments to the Nomination and Remuneration Committee