Mumbai: The Securities and Exchange Board of India (Sebi) has written to the finance ministry seeking the appointment of at least two independent members, said two people with direct knowledge of the matter.

The aim is to resolve the problem of “lack of independent voices on its board". The move comes against the backdrop of the markets regulator not having enough independent directors, though such directors and their responsibilities towards boards have assumed increased importance in the wake of recent changes to corporate governance norms.

Sebi prescribes that half of its directors should be independent. However, its board has eight members, including the chairman and four wholetime directors. As such, less than half of the board is made up of independent directors.

The Sebi board is led by chairman Ajay Tyagi and has Madhabi Puri Buch, G. Mahalingam, Ananta Barua, and S.K. Mohanty as wholetime members. The three independent members are Subhash Chandra Garg, secretary, department of economic affairs, Inteji Srinivas, secretary, ministry of corporate affairs, and N.S. Vishwanathan, deputy governor, Reserve Bank of India (RBI).

The letter to the finance ministry aims at doing away with the issue of ‘lack of independent voices on its board’.

An email sent to a Sebi spokesperson on Monday did not elicit any response till press time.

“Sebi has written to the finance ministry seeking the appointment of two more independent members to its board to ensure that at least half the board is made up of independent members," said an official, requesting anonymity.

The equations on the board of the market regulator changed when part-time board member and senior lawyer Arun Sathe stepped down earlier this year and Sebi got an additional whole time member.

Sathe is a member of the Bharatiya Janata Party (BJP) and the elder brother of Lok Sabha Speaker Sumitra Mahajan. He is also a former full-time member of the Rashtriya Swayamsevak Sangh.

The markets regulator traditionally had three whole time members and four independent members to ensure independence at its board. However, the addition of Ananta Barua as whole time member in August skewed the balance.

“With amendments for additional wholetime member there is also a need for an additional part time member," said one of the two people quoted above, also requesting anonymity.

Sebi has held two board meetings since the appointment of the additional member, one in September and one in December.

“While the RBI board meetings are relatively low-key affairs or routine affairs, the Sebi board meetings are always followed by key decisions for the market and other stakeholders. So, there is an acute need for the Sebi board to be independent," said a senior academician, who did not wish to be identified. This also assumes importance in the wake of the debate on institutional independence and autonomy at public institutions such as the RBI. The debate started following reports that the government may use Section 7 of the RBI Act, which empowers the government to give directions to the central bank on matters of public interest.

Sebi has also on many occasions faced criticism that it uses a different brush for public sector undertakings and private sector companies. While Sebi penalised private sector companies for failing to maintain 25% public float, 30 PSUs are yet to meet the requirement long after the lapse of the August deadline.

“We go by provisions in our Act and allow exemptions only on that basis. On minimum public shareholding the government goes by its Acts (many PSUs are governed by different ministries)," Tyagi said on 12 December after the Sebi board meeting.

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