SEBI suggests external agency for MII appointments, KMPs in risk management, compliance

The circular on key proposals will be applicable from August 25.

Market regulator Securities and Exchange Board of India (SEBI) has issued norms on the appointment, re-appointment and termination as well as cooling off period for key managerial persons responsible for the compliance, risk management, technology, and information security verticals of stock exchanges and other market infrastructure institutions (MIIs).

SEBI is of the view that, along with having a capable and efficient managing director (MD), there is a need for key managerial people of appropriate stature and ability, in risk management and compliance verticals. So that exchanges and other MIIs deliver the primary mandate as a public utility infrastructure institution and a first line regulator.

Appointment of Key People in important verticals

SEBI suggested the appointment of external agency for the purpose of appointment of the key managerial people. “The MII shall engage an independent external agency to identify and recommend suitable candidates for appointment as CO, CRiO, CTO and CISO or by whatever designations called. The Agency shall submit its recommendations to the Nomination and Remuneration Committee (NRC) of the MII."

Then NRC will evaluate the recommendations of the agency and after discussion with the management of the MII, submit its recommendations for appointment of such KMPs to the governing board of the MII. Following this, the governing board will take the final decision for appointment.

The regulator also highlighted the importance of these key people. SEBI circular said, “These KMPs namely the Compliance Officer (CO), Chief Risk Officer (CRiO), Chief Technology Officer (CTO) and Chief Information Security Officer (CISO) are crucial for any MII to deliver on its core public interest mandate of giving primacy to compliance, risk management, technological resilience and market integrity, over commercial considerations.

Re-appointment of Key People

SEBI said the NRC will evaluate the cases of re-appointment, termination or acceptance of resignation of CO, CRiO, CTO and CISO or by whatever designations called and after discussion with the management of the MII, submit its recommendations to the Governing Board of the MII.

The governing board will take the final decision for re-appointment, termination or acceptance of resignation of such KMPs. It also said that, no such KMPs to be terminated unless given a reasonable opportunity of being heard by the Governing Board.

Cooling-off period for KMPs if from a competing MII

As per the circular, the cooling-off period for Non-Independent Directors and public interest directors (PIDs) will be as prescribed by the Governing Board of the MII. The Governing Board of will prescribe the mechanism for a cooling-off period for KMPs (including the MD) of the MII joining a competing MII as a KMP. For the purpose of competing MII the meaning will be competing recognised stock exchanges or recognised clearing corporations and competing depositories.

Re-appointment of Public Interest Director (PID)

On the issue of re-appointment of Public Interest Director, SEBI said, that in case the existing PID after completion of his first term is not considered for re-appointment by the Governing Board of the MII, the rationale for the same shall be recorded and informed to SEBI.

The circular on key proposals will be applicable from August 25.