SEBI releases criteria for external evaluation of statutory committees of stock exchanges, other MIIs

MIIs have been asked to do also an internal evaluation of their performance and the performance of their statutory committees in a manner specified by SEBI.

The market regulator has issued the parameters by which market infrastructure institutions (MIIs) such as stock exchanges and clearing corporations have to get an evaluation done, of the functioning of their statutory committees, every three years by an external agency.

The first of the external evaluations will be done for FY25 and the market regulator has asked that it be submitted to the governing board of the MII and SEBI by September 30, 2025.

MIIs are required to set up various statutory committees such as nomination and renumeration committee, standing committee on technology, risk management committee and investment comittee. In a circular issued on January 30, the Securities and Exchange Board of India (SEBI) issued guidelines on how these committees' functioning needs to be monitored and evaluated both by an external agency and through internal mechanisms.

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The external agency will conduct these evaluations based on three main parameters and each of these three parameters will be assigned different weightages. According to the circular, roles, responsibilities and duties of statutory committees will be assigned 40 percent weightage; effectiveness of meetings of these committees will be 30 percent; and governance aspect of statutory committees will be 30 percent. Under these criteria, the evaluation will consider sub-parameters and under each sub-parameters there will be performance indicators and so on.

The circular said, "In order to bring consistency and uniformity with respect to evaluations to be done by the external agency, the matter with regard to broad criteria, the weightage for each criterion, sub-parameters under each criterion, etc. was discussed at the Industry Standards Forum (ISF) of MIIs. Further, for each sub-parameter, sample Key Performance Indicators (KPIs), both quantitative and qualitative in nature, were identified in consultation with the ISF"

MIIs have been asked to do also an internal evaluation of their performance and the performance of their statutory committees in a manner specified by SEBI. The circular also asked MIIs to develop the set of criteria for these internal evaluations.

MIIs have been asked to submit these internal evaluation reports to their governing boards within three months from the end of every fiscal, starting with FY25.