The Securities and Exchange Board of India has proposed changes to the process for appointment of specific key managerial persons of a market infrastructure institution, and cooling-off period for top executives and directors of an MII joining a competing organisation.
Stock exchanges, clearing corporations and depositories are collectively referred to as MIIs. The key managerial persons are those serving as compliance officer, chief risk officer, chief technology officer and chief information security officer.
Appointment Of KMPs In MIIs
SEBI, in a consultation paper floated on Friday, has proposed that an MII should engage an independent external agency to identify and recommend suitable candidates for KMPs in charge of covering operations, technology, regulatory compliance, risk management and investor grievances.
The agency's recommendations will be submitted to the nomination and remuneration committee of the MII, which will then evaluate them and forward its own suggestions to the MII's governing board and the market regulator simultaneously, the paper proposed.
The SEBI will review the NRC's recommendations and provide feedback, if any, within a specified timeframe.
If no comments are received from SEBI within the prescribed period, the MII’s board will assume that the market regulator has no objections. The board will then make the final appointment decision based on the NRC's recommendations and SEBI's feedback, if any, it added.
Regarding reappointment or termination, the NRC will evaluate the cases and submit its recommendations to both the board and SEBI simultaneously.
The market watchdog will review the NRC’s recommendations and provide its comments, if any, to the board within a specified timeframe, the SEBI paper proposed. If no comments are received within the prescribed period, the board will assume that SEBI has none to offer, it added.
The board will make the final decision on reappointment or termination after considering the NRC's recommendations and SEBI's observations.
"The above process can further facilitate and institutionalise appropriate independent focus on the core public utility mandate of the MII, and ensure that persons of appropriate stature and standing are appointed as KMPs," the paper said.
Cooling-Off Period For KMPs
While the current regulations specify a minimum cooling-off period for public interest directors to move to other MIIs, there is none mandated for the managing director, other directors, and other KMPs. This anomaly may need to be addressed, SEBI said.
The regulator has now proposed that an MII shall adopt and implement a policy approved by its governing board prescribing a minimum cooling-off period for KMPs and their directors before joining a competing MII. This will be applicable for managing directors and public interest directors, as per the proposal.
SEBI will no longer prescribe a cooling-off period for PIDs of an MII joining another MII. This will empower the board of an MII to set the policy around minimum cooling-off period, it added.
The capital market has sought public comments on the consultation paper till Dec. 12.
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