Sebi proposes wider pool of MII board candidates, SOP for key officials

The Securities and Exchange Board of India (Sebi) on September 9 proposed changes to strengthen the governance of market infrastructure institutions (MIIs), including a review of the criteria for appointing directors to their governing boards and a standardised framework for four key management positions.

In a consultation paper, the regulator has proposed extending the existing carve-out for directors of public financial institutions and public-sector banks to directors of companies with well-diversified shareholding, where such companies have associates that are trading members (TMs), clearing members (CMs) or depository participants (DPs).

The proposal comes amid what Sebi described as practical difficulties faced by MIIs in finding suitable candidates for director positions, particularly Public Interest Directors, under the existing provisions.


Under the current rules, no trading member or clearing member, or their associates and agents, can be on the governing board of a recognised stock exchange or recognised clearing corporation. Similar provisions apply to depositories in relation to depository participants.

Sebi said it had received representations that the existing provisions were “very restrictive”, making individuals on the board of a company ineligible for appointment as directors on an MII governing board even when they were “very remotely related” to the associates of the company that may be a TM, CM or DP.

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The regulator noted that conglomerates or holding companies may have multiple subsidiaries operating with Chinese walls, with little or no interference in their operations from one another. A director of one company in such a conglomerate, it said, should not become ineligible as a director in an MII merely because the conglomerate or holding company has a separate subsidiary in the business of a TM, CM or DP.

Sebi said there was a need to review the regulation to encourage the flow of expertise and talent into MIIs.

10% threshold proposed

Sebi has proposed that a company be considered to have well-diversified shareholding if no shareholder, other than shareholders in the public sector, either individually or together with persons acting in concert, directly or indirectly owns more than or equal to 10% stake, controls the company or holds shares carrying more than or equal to 10% of its voting rights.

The proposed changes would be made to the Securities Contracts (Regulation) (Stock Exchanges and Clearing Corporations) Regulations, 2018, and the Securities and Exchange Board of India (Depositories and Participants) Regulations, 2018.

The proposals were considered by Sebi’s Secondary Market Advisory Committee (SMAC) at its meeting held on April 16-17, 2026.

SOP for four key roles

In a separate proposal, Sebi has proposed a Standard Operating Procedure (SOP) prescribing the relevant qualification, experience, skill-set and certification requirements for the Chief Technology Officer (CTO), Chief Information Security Officer (CISO), Compliance Officer (CO) and Chief Risk Officer (CRiO) of MIIs.

Sebi said these key management personnel are crucial to the functioning of MIIs, which are public infrastructure utilities for the capital markets and also function as first-line regulators.

The roles are important to ensuring technological resilience, cyber-security, compliance and risk management, with these considerations taking primacy over commercial considerations, the regulator said.

While the governing board of an MII currently approves the appointment, reappointment, termination and acceptance of resignation of these KMPs, there is no standardised framework prescribing the qualification, experience, skill-set and certification required for each role, Sebi said.

The proposed SOP would be approved by the governing board of the MII, taking into account inputs from relevant statutory committees, according to the circular.

For the CTO and CISO, inputs would be taken from the Standing Committee on Technology (SCOT). For the Compliance Officer, inputs would come from the Regulatory Oversight Committee (ROC), while the Risk Management Committee (RMC) would provide inputs for the CRiO.

Sebi has also proposed that vacancies in these positions be filled expeditiously. Where a vacancy is anticipated, the MII would plan for it in advance to avoid any gap. In any case, the position may be filled within three months from the date it becomes vacant.

The regulator has also sought views on whether MIIs should appoint deputies for the CTO, CISO, CO and CRiO positions to ensure continuity.

This article has been written by Kumar Gaurav, who is not a SEBI-registered Research Analyst or an Investment Adviser. Gaurav and his/her ‘relative(s)’ (as defined under Section 2(77) of the Companies Act, 2013) do not hold any financial interest in the companies mentioned in this article as of the date of publication. The views/recommendations mentioned in this article, wherever applicable, are those of the respective SEBI-registered Research Analyst/brokerage and have been reproduced/reported with due attribution. They should not be construed as the views or recommendations of The Economic Times Digital or the journalist. Readers are advised to consider the original research report and make their investment decisions based on their own assessment.