The Securities and Exchange Board of India (SEBI), on November 22, 2024, issued a notification related to Guidelines to Stock Exchanges, Clearing Corporations and Depositories.
Accountability Mechanisms:
Public Interest Directors (PIDs) of MIIs are required to meet semi-annually to discuss critical issues like regulatory compliance, operational performance, resource adequacy, and conflict of interest. Mandatory reporting to SEBI and the MII board within 30 days of these meetings has been mandated. Compliance Officers (COs) and Chief Risk Officers (CRiOs) must submit regular reports to SEBI on regulatory adherence and risk management, following specified timelines.
Transparency and Disclosures:
MIIs must disclose board meeting agendas and minutes related to regulatory, compliance, and risk areas, while exempting confidential items. Standard Operating Procedures (SOPs) for disciplinary actions against Key Management Personnel (KMPs) are to be devised, covering scenarios for actions like suspension, termination, and invoking malus-clawback provisions. Whistleblower complaints must be resolved within 60 days, with oversight from the Audit Committee and escalation to the board if required.
Monitoring Members and Participants:
MIIs must adopt advanced technologies like RegTech and SupTech for member supervision, facilitate online submissions, and disclose material information, such as investor grievances and regulatory actions, on their websites. Non-compliance by members must be shared with other MIIs. Policies for periodic monitoring of outsourced vendors and back-office agencies have also been mandated to mitigate risks.
Training and Data Sharing Policies:
Directors on MII boards will receive training on market developments and regulatory advancements. New directors will undergo familiarization programs. MIIs are required to implement data-sharing policies, including regular audits to ensure compliance, and report breaches to SEBI and their governing boards.
Appointment and Reporting Structures:
The process for appointing Public Interest Directors (PIDs) is simplified into two stages, with skill evaluation metrics to assess candidates. Key Management Personnel (KMPs) like COs, CRiOs, CTOs, and CISOs are required to report to the Managing Director, with separate statutory committee meetings for independent oversight.
Implementation Timeline:
The circular, effective from April 1, 2025, mandates MIIs to take necessary steps, amend their rules, and inform market participants about the new guidelines. This initiative aims to strengthen governance, safeguard investor interests, and enhance the securities market’s development.
[Notification No. SEBI/HO/MRD/POD-3/P/CIR/2024/162]
