SEBI board may discuss 100% shareholding in MIIs, regulations for independent directors

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The board of Securities and Exchange Board of India (SEBI) will meet in the last week of June to likely clear the annual accounts of Sebi, which will be tabled in the monsoon session of Parliament.

The SEBI board may also discuss amendments to the Securities Exchange and Clearing Corporations (SECC) Regulation of 2018. The regulator may finalise the consultation paper on the ‘Review of Ownership and Governance Norms’ for facilitating new entrants to set up stock exchanges/depositories. The paper was issued on January 6.

SEBI may also finalise new norms for independent directors in this meeting. While listed companies have reservations on the independent director regime, there is a strong public opinion in favour of it.

A source close to the development told Moneycontrol: “SEBI may come out with an amicable situation for independent directors, which was also reviewed by the primary market advisory committee recently”.

Discussion paper on stock exchange ownership

SEBI has proposed raising the shareholding cap for stock exchanges, clearing corporations and depositories. Under the current framework, ownership of Market Infrastructure Institutions (MIIs) is capped at a lower shareholding limit (not more than 5 percent) for individuals (domestic or foreign), and allows only up to 15 percent for institutions (domestic or foreign) in general, and ownership stake by select category of institutions (domestic or foreign).

This discussion paper proposed in last board meeting also but board had postponed last time which may come up again for the discussion.

The current shareholding limits were prescribed with the objective of achieving a diversified ownership structure of MIIs, in line with the recommendations of the Bimal Jalan committee (2010) on ‘Review of Ownership and Governance of Market Infrastructure Institutions’ and the R. Gandhi Committee (2018) on ‘Review of regulations and relevant circulars pertaining to MIIs’, which emphasised the public utility role of MIIs in furthering the larger economic and regulatory interests of the market.

However, the discussion paper proposed that the promoter setting up the MII may, directly or indirectly, either individually or with others, hold up to 100 percent shareholding.

The shareholding of such promoters, directly or indirectly, shall be brought down to not more than (either 51 percent or 26 percent) in 10 years from the date of commencement of business.

SEBI has proposed that foreign nationals and entities and entities which are regulated by the Financial Action Task Force (FATF) can set up the MIIs, either directly or with others, and hold up to 49 percent shareholding. Smaller exchanges in need of money and technology are awaiting this step.

Before this discussion paper, Navi Mumbai-based commodity exchanges had requested SEBI for increasing the shareholding cap limit. Since a Delhi-based commodity exchange had shown interest in futures trading, it wanted a significant stake in the commodity exchange.

If the proposals are cleared, it will help the National Commodity and Derivatives Exchange, in which the National Stock Exchange has a 15 percent stake.