The Securities and Exchange Board of India (SEBI) on November 22, 2024, issued a Consultation paper on the “Process for appointment of specific KMPs of an MII; and cooling-off period for KMPs and Directors of an MII joining a competing MII”.
To enhance the governance framework of Market Infrastructure Institutions (MIIs) such as Stock Exchanges, Clearing Corporations, and Depositories, it is essential to ensure that these institutions are led by Key Management Personnel (KMPs) with the right expertise and independence. These KMPs—specifically the Chief Compliance Officer (CO), Chief Risk Officer (CRiO), Chief Technology Officer (CTO), and Chief Information Security Officer (CISO)—are critical to ensuring that MIIs prioritize technological resilience, market integrity, and compliance over commercial interests. This governance structure supports MIIs in fulfilling their public interest mandate effectively.
While the Governing Board of the MII sets the tone at the top, the culture of giving primacy to public interest (Verticals 1 and 2) over commercial interest (Vertical 3) must run deep at the operating level as well. Note that the MD has overall authority and responsibility over all three Verticals (1, 2, and 3).
In order to reinforce the important role of CO, CRiO, CTO and CISO (by whatever name called) in carrying out their obligations in public interest, without being influenced by commercial considerations, it is proposed that the process for appointment, reappointment and termination of service of such specific KMPs of Vertical 1 and 2 of an MII may be subject to the following:
As with the appointment of MD, MII shall engage an independent external agency (“the Agency”) to identify and recommend suitable candidates for appointment as KMPs in charge of Verticals 1 and 2 of the MII, viz. CO, CRiO, CTO and CISO by whatever designations called.
The NRC shall evaluate the cases of reappointment/ termination and submit its recommendations to the Governing Board of the MII and SEBI simultaneously.
The comments/suggestions maybe submitted latest by December 12, 2024 through web based online mode at the following link - https://www.sebi.gov.in/sebiweb/publiccommentv2/PublicCommentAction.do?doPublicComm
