Market regulator Securities and Exchange Board of India (SEBI) has proposed easing restrictions on the appointment of directors to the governing boards of market infrastructure institutions (MIIs), including stock exchanges, clearing corporations and depositories, saying the existing rules have made it difficult to find suitable candidates, particularly for Public Interest Director (PID) positions.
Under the current framework, a person who is a director of an entity that is a broker, clearing member (CM) or has an associate that is a broker or CM can be deemed ineligible for an MII governing board. Similar restrictions apply to directors associated with depository participants (DPs).
In its consultation paper, SEBI said the existing provisions are proving too restrictive for large financial conglomerates that have multiple subsidiaries operating independently, often with internal ‘Chinese walls’.
“Director of a company in a conglomerate should not become ineligible as a director in an MII, just because the conglomerate or the holding company has a separate subsidiary in the business of TM/CM/DP,” SEBI said in its consultation paper.
The SEBI paper further said there is a need to review the Stock Exchanges and Clearing Corporations Regulations to encourage the flow of expertise and talent into MIIs.